Using $LOT to Determine Best Market Weight and Quantify Harvest Results - Dr. Mike Woltman, Illini Swine, from the 2016 Power Of The Past, Force Of The Future Customer Appreciation event, August 16, 2016, hosted by Rensselaer Swine Services and Bethany Swine Health Services, Jasper Country Fairgrounds, IN, USA. More presentations at http://www.swinecast.com/2016-power-of-past-force-of-future-customer-appreciation

1. Using $LOT to Determine Best
Market Weight and Quantify
Harvest Results
Mike Woltmann
Illini Farms

2. Discussion Points
•What is $LOT
•How can $LOT be used as a marketing tool?
•Projected profit per head next 12 months
•Using $LOT to project target market weights

3. What is $LOT

4. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.

5. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.
• Best category is set at ‘0’ and $LOT is negative in all
other weight categories.

6. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.
• Best category is set at ‘0’ and $LOT is negative in all
other weight categories.
• Assumed there is unlimited time to reach the ideal
market weight category.

7. What is $LOT
• The $ amount lost when a pig is marketed in any
weight category other than the best.
• Best category is set at ‘0’ and $LOT is negative in all
other weight categories.
• Assumed there is unlimited time to reach the ideal
market weight category.
• Margin over feed drives what the best category and
$LOT for each weight category are.

8. What is Margin Over Feed?

9. What is Margin Over Feed?
•Live market price –
cost per pound of gain

10. What is Margin Over Feed?
•Live market price – cost per
pound of gain
•This cost per pound of gain is at
the time of marketing

11. Historical Margin Over Feed
At 270 Pounds
($0.15)
($0.05)
$0.05
$0.15
$0.25
$0.35
$0.45
$0.55
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
MarginOverFeed
Margin over feed
Average
Average without 2014

12. Projected Margin Over Feed at 270 Pounds
Upcoming 12 Months
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
$0.18
$0.20
Margin over feed
Average

13. Comparing $LOT for Tyson
and IPC at Low, Medium
and High Margin Over
Feed

14. $LOT Tyson – Low, Medium and High Margin Over Feed
-$50
-$45
-$40
-$35
-$30
-$25
-$20
-$15
-$10
-$5
$0
143 151 159 167 175 182 190 198 206 214 222 229 237 244 252 259 267
$LOT
Carcass Weight
Low
Medium
High

15. $LOT IPC – Low, Medium and High Margin Over Feed
-$50
-$45
-$40
-$35
-$30
-$25
-$20
-$15
-$10
-$5
$0
155 163 168 175 190 208 225 238 243 248 253 259
$LOT
Carcass Weight
Low
Medium
High

16. $LOT IPC Versus Tyson – Medium Margin Over Feed
-$50
-$45
-$40
-$35
-$30
-$25
-$20
-$15
-$10
-$5
$0
143 151 155 159 163 167 168 175 182 190 198 206 208 214 222 225 229 237 238 243 244 248 252 253 259 267
$LOT
Carcass Weight
IPC
Tyson

17. How can $LOT be used as a
marketing tool?

18. How can $LOT be used as a
marketing tool?
•Project target weights

19. How can $LOT be used as a
marketing tool?
•Project target weights
•Determine current target weights

20. How can $LOT be used as a
marketing tool?
•Project target weights
•Determine current target weights
•Quantify marketing results with rapid feedback
to those involved in the day-to-day marketing
process

21. Projected Profit Per Head
Next 12 Months

22. How Were Feed Costs And Market
Prices Determined?
• Based on 8-8-16 market close
• Hogs
• Futures prices
• Adjusted with historical basis
• Feed
• Corn = futures price adjusted for Northern Illinois
historical basis
• Meal = futures + $20
• DDGs = 115% of corn

23. Profit Per Head Cash
Cash
Lean Hog Price $65.50
Corn Price/Bu. $3.25
Meal Cost/Ton $355
Feed Cost/Ton $217
WF Cost/ lb. of gain $28.15
Live Breakeven $51.80
Carcass Breakeven $68.10
Profit/Loss Per Head -$5.65
Based off of 8-8-16 market close

24. Profit Per Head Fall/Winter 2016
October 2015 December 2015
Lean Hog Price $61.15 $53.82
Corn Price/Bu. $3.28 $3.13
Meal Cost/Ton $354 $352
Feed Cost/Ton $217 $213
WF Cost/ lb. of gain $28.27 $27.66
Live Breakeven $51.90 $51.20
Carcass Breakeven $68.30 $67.40
Profit/loss Per Head -$15.35 -$29.25
Based off of 8-8-16 market close. By lean hog contract period

25. Profit Per Head Winter/Spring 2017
February 2016 April 2016
Lean Hog Price $57.35 $63.35
Corn Price/Bu. $3.35 $3.47
Meal Cost/Ton $343 $341
Feed Cost/Ton $218 $222
WF Cost/ lb. of gain $28.40 $28.80
Live Breakeven $52.00 $52.50
Carcass Breakeven $68.40 $69.00
Profit Per Head -$23.85 -$12.20
Based off of 8-8-16 market close. By lean hog contract period

26. Profit Per Head Summer 2017
June 2016 July/August 2016
Lean Hog Price $75.58 $74.05
Corn Price/Bu. $3.63 $3.72
Meal Cost/Ton $342 $341
Feed Cost/Ton $227 $229
WF Cost/ lb. of gain $29.50 $29.75
Live Breakeven $53.20 $53.50
Carcass Breakeven $70.00 $70.40
Profit Per Head $6.60 $9.10
Based off of 8-8-16 market close. By lean hog contract period

27. Based On Projected
Profit(Loss) Per Head
Where Should Market
Weights Be The Next 12
Months?

28. What Measurements Are We Looking At
To Determine Best Market Weight?
•Margin over feed
•Cash or Future Hog Price
•Feed price - cost per pound of gain
•Mid-point of the best approximate 60-pound
range.

29. Projected Target Market Weights
265
270
275
280
285
290
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Smithfield
Heavy
IPC
Tyson

30. What are Current Target
Weights?

31. $LOT IPC Cash
Base $62.25
Carcass
Value
$Lot
Versus Top
Category
0 150 -$44.53
151 160 198 209 $79.4 -$34.40
161 165 211 216 $96.3 -$26.41
166 170 217 223 $105.3 -$22.02
171 180 224 236 $115.1 -$10.45
181 200 237 262 $124.9 -$3.96
200 215 262 281 $139.4 -$3.43
216 235 283 308 $146.8 $0.00
236 240 309 314 $145.2 -$4.47
241 245 315 321 $143.4 -$23.70
246 250 322 327 $131.9 -$29.01
251 255 329 334 $119.9 -$34.55
256 335 0 $126.7 -$49.32
Carcass
Weight Range
Est. Live Wt.
Range
IPC

32. $LOT Tyson Cash
Base $59.50
Carcass
Value
$Lot
Versus Top
Category
0 139 -$42.47
140 146 183 191 $67.0 -$37.16
147 155 192 203 $75.0 -$33.34
156 163 204 213 $85.2 -$27.35
164 171 215 224 $99.0 -$17.74
172 178 225 233 $109.4 -$11.29
179 186 234 243 $116.1 -$8.51
187 194 245 254 $123.3 -$5.67
195 202 255 264 $129.3 -$3.98
203 209 266 274 $135.7 -$1.67
210 218 275 285 $141.8 $0.00
219 225 287 295 $146.0 -$0.26
226 233 296 305 $148.1 -$2.29
234 240 306 314 $148.7 -$5.87
241 248 315 325 $147.9 -$10.80
249 255 326 334 $147.4 -$15.52
256 263 335 344 $147.5 -$19.72
264 271 346 355 $146.7 -$25.27
Carcass
Weight Range
Est. Live
Weight Range
Tyson

33. Day-to-Day Marketing Feedback

34. Day-to-Day Marketing Feedback
• Timely
• Return to farm day after marketed

35. Day-to-Day Marketing Feedback
• Timely
• Return to farm day after marketed
• Simple
• Weight
• Variation
• Presented in 6 categories across all packers
• Focus on % in best category – narrow variation
• $LOT

36. Day-to-Day Marketing Feedback
• Timely
• Return to farm day after marketed
• Simple
• Weight
• Variation
• Presented in 6 categories across all packers
• Focus on % in best category – narrow variation
• $LOT
• This is integrated into a close-out program

37. Marketing Feedback Example
FARMLAND HEAVY
Load 1 Load 2 Load 3 Load 4 Load 5 Load 6 Total % of total
6/1/16 6/8/16 6/10/16 6/16/16 6/23/16 6/24/16
149 156 158 164 171 172 162
0 0 0 2 0 0 2
2 0 0 1 0 1 4
$2.14 $1.31 $1.16 $1.44 -$2.01 $1.13 $0.86
287 285 292 287 294 281 288
218 222 223 219 226 214 220
$77.38 $79.28 $80.68 $82.46 $84.29 $84.69 $81.47
< 164 < 215 0 0 0 0 1 2 3 0.3%
164 to 177 215 to 232 0 0 0 2 5 2 9 0.9%
178 to 207 233 to 271 26 26 17 25 19 49 162 16.8%
208 to 237 271 to 310 125 115 117 118 83 95 653 57.5%
238 to 252 311 to 330 6 21 21 17 35 10 110 9.7%
> 252 331+ 1 1 2 2 17 2 25 2.2%
Total 158 163 157 164 160 160 962
$LOT/pig $2.34 $3.70 $3.55 $3.88 $9.81 $6.00 $4.88
Farm
Group
Date
Days PW
Truck dead
Down or subject
Sort G/L
Live wt
Carcass wt
Carcass base

38. Marketing Feedback Example
Farm
Site Load 7 Total % of total
Date 8/10/16
Days PW 170 162
Truck dead 0 1
Down or subject 0 1
Sort G/L $0.27 $1.44
Live wt 293 280
Carcass wt 224 215
Carcass base $68.42 $72.23
< 164 < 215 1 1 0.1%
164 to 177 215 to 232 2 10 1.0%
178 to 207 233 to 271 10 317 30.8%
208 to 237 271 to 310 116 628 61.0%
238 to 252 311 to 330 18 58 5.6%
> 252 331+ 8 15 1.5%
Total 155 1029
$LOT $831 $4,918
$LOT/pig $5.36 $4.78

39. Upcoming Market Considerations

40. Upcoming Market Considerations
• Fall growth approaching

41. Upcoming Market Considerations
• Fall growth approaching
• Markets are falling
• Pull pigs ahead to get better markets?

42. Upcoming Market Considerations
• Fall growth approaching
• Markets are falling
• Pull pigs ahead to get better markets?
• Target market weights are lower
• OR if not lower the loss for being over target weight is higher
than being under target

43. For Projected Fall Markets Lower $LOT Loss If
Lighter Than Target Versus Heavier
Base $54.25
Carcass
Value
$Lot
Versus Top
Category
0 150 -$38.29
151 160 198 209 $67.0 -$28.96
161 165 211 216 $83.3 -$21.57
166 170 217 223 $91.1 -$17.58
171 180 224 236 $100.3 -$6.61
181 200 237 262 $108.8 -$1.16
200 215 262 281 $121.5 -$1.83
216 235 283 308 $127.6 $0.00
236 240 309 314 $125.7 -$5.67
241 245 315 321 $123.5 -$25.30
246 250 322 327 $111.1 -$31.01
251 255 329 334 $98.7 -$36.95
256 335 0 $104.3 -$52.28
Carcass
Weight Range
Est. Live Wt.
Range
IPC

44. Upcoming Market Considerations
• Fall growth approaching
• Markets are falling
• Pull pigs ahead to get better markets?
• Target market weights are lower
• OR if not lower the loss for being over target weight is higher
than being under target
• Shackle Space/Scheduling?

45. Upcoming Market Considerations
• Fall growth approaching
• Markets are falling
• Pull pigs ahead to get better markets?
• Target market weights are lower
• OR if not lower the loss for being over target weight is higher than being
under target
• Shackle Space/Scheduling?
• All of the above say get into barns earlier rather than later