90 Comparing Packer Matrices 80 - Iowa State University

Feb 2005 Iowa Pork Regional Conferences 1

1Your Investment. Your Future.

Optimal Selling Strategies &Comparing Packer Matrices

Steve R. Meyer, Ph.D.PresidentParagon Economics, Inc.

2005 IPPA-IPIC Regional Meetings


University of Missouri, Iowa State University, Pork magazine, Pig Improvement Company, National Pork Board, Monsanto Choice Genetics, and Land O’ Lakes.

Percent of Hogs Sold on Carcass Merit Basis

6070 71

77

88

76

63

80 80 77

97 99

81

9385 89

95 98

0102030405060708090

100

1-3 3-5 5-10 10-50 50-500 500+Firm Size by Head Marketed

Percent

199720002003



2932123Own packing plant

05713161213Group contract

76825564Negotiated contract

6

70%

3-5

4

77%

1-3

Firm Size (thousand head mktd.)

5

66%

5-10

5

55%

10-50

04Other

33%13%Load by load

500+50-500

How Firms Marketed Slaughter Hogs, 2003(percent of firms in size category)



41653Window - no ledger

4857Formula - meat prices

1956Formula - feed/ledger

6554Formula - feed/no ledger21Window - ledger

68393732Formula - hog prices

29118Contract - futures market

3-51-3


7

29%

5-10

5

26%

10-50

2Other

15%11%Spot market - negotiated

500+50-500

Percent of Hogs Sold under Marketing Contracts(average of percentages reported by size category)


Marketing – More than pricing!Business schools talk about the 4 (or 5) P’s of Marketing– Product– Place– Price– Promotion– Positioning – the 5th P; added in the ’70s

Surprisingly, all have a place in live hog marketing!


Product – What kind of hogs do you have?

Carcass yield – a factor only if you sell on a live weight basisLean muscle yield – BIG factor in the ’80s and ’90s; still a big determinant of net priceLean muscle quality –growing importance but difficult to measure and quantifyBreed – two aspects– Manifestation of muscle quality– Consumer perception – Black hog meat

Rearing method



Product – What are you selling?Hogs are a PRODUCTION INPUT to the meat production process– Intermediate good– Today’s differentiated product is tomorrow’s

commodity– Very competitive

Value is strictly a function of the value of the outputs – meat, by-products– Anything that causes less efficient processing

detracts from value!8

Your Investment. Your Future.

PlaceGeographical location impacts transportation costs, trim loss, death loss, etc .A partial determinant of your market options for type and quality– Few options: Can affect local price– Not a factor in Iowa



2461714169150-199 mi.

46109105200-299 mi.

877643300 mi. or more

441126201917100-149 mi.

20662131222450-99 mi.

29%

3-5

42%

1-3


21%

5-10

18%

10-50

04%Less than 50 mi.

500+50-500

Distance Hogs Are Hauled for Slaughter(percent of firms responding in size category)


Place – Extend the concept to Time . . Geographical location impacts transportation costs, trim loss, death loss, etc .A partial determinant of you market options for type and qualityTIME can differentiate your product as well– Possibly limited by production system/facilities– Time interacts with several factors to determine

optimal marketing weight:» Feed costs» Facilities costs» Other constraints



194133415463Market at desired weight

171432323127Somewhat flexible

15%

3-5

10%

1-3


26%

5-10

35%

10-50

61%45%Tight schedule

500+50-500

Flexibility in Marketing Dates(percent of firms responding in size category)


One choice variable is the day of the week . .

Avg. Price*

$/cwt. Percent $/cwt $/hd.**

Monday $56.72 0.026% $0.015 $0.03

Tuesday $56.73 0.052% $0.030 $0.06

Wednesday $56.62 -0.152% ($0.086) -$0.17

Thursday $56.87 0.294% $0.167 $0.33

Friday $56.58 -0.221% ($0.125) -$0.25

Average $56.70*Iowa-Minnesota Prior Day Purchase, Wtd. Average Negotiated Price.**Assumes carcass weight of 196 pounds.

Difference from Average

Day of Week Differences, May 2001-January 2005



Price – Consider a retailer’s pricing decision:

Buy products as cheap as possible and keep administrative costs as low as possibleAdd a profit margin that will pay all administrative costs plus the desired profitOffer the item to whoever will pay the price and allow them to buy as much as they wantIf not enough people will pay that price in a reasonable amount of time, offer the remaining stock at the highest price that will get it sold.


PRICE YOUR PRODUCT WHEN YOU BUY IT!

Buy inputs as cheap as you can, add expected transformation and administrative costsAdd a profit margin that earns an acceptable rate of return on equityKnow what packer forward contracts and the futures markets are paying on any daySell if they meet your price objectivesYou can always put the remaining inventory on sale at the cash price when it HAS to be moved.


Promotion and PositioningPromotion, per se, is difficult with any commodity product -- UNDIFFERENTIATEDBreed or rearing method differentiation can be promotedPOSITIONING – Targeting a product to a buyer who you know prefers the characteristics of the product – Know who wants what kind of hog– Develop a relationship with packer buyer– Research niche opportunities



10897214 packers106415 packers

526 packers197 packers

1961131714103 packers1010333336322 packers

47%3-5

58%1-3


42%5-10

38%10-50

58 packers

24%15%1 packer 500+50-500

Number of Different Packers Sold to in 2003(percent of firms responding in size category)



Percent of Marketings Sold to Producer’s Largest Buyer

85%1 - 50

82%10 - 50

84%5 - 10

88%3 - 5

88%1 - 3

Averageof Firms Reporting

Firm Size(1,000 head mktd annually)


Packers reveal preferences through systemsAll Iowa packers pay mainly by carcass weight and leannessDIFFICULT TO COMPARE– Different measurement devices– Different leanness measurements– Percentage versus dollar premiums

Reasons for this difficulty?– Different customers and different products mean different

optimal systems– Differences are not MEANT to be confusing but packers

don’t care if you can make direct price comparisons



Tyson Grid – 2 parts to itLeanness Premiums/Discounts– 15 weight and 14 leanness categories – heaviest 3

leanness categories are the same– Largest discount is $8/cwt carc. for <44.9% and >219#– Largest premium is $10/cwt carcass for >55% and

>256# Carcass Weight Discounts– 19 weight categories (note the difference)– The “round” numbers on the page are LIVE weight –

smaller than the carcass discounts which are the ones actually used.


Tyson – Combine the two and get 19 x 12

WeightEst Live Hot Casc <45 45-45.9 46-46.9 47-47.9 48-48.9 49-49.9 50-50.9 51-51.9 52-52.9 53-53.9 54-54.9 55 & up181-190 133-139 (19.75)$ (19.75)$ (18.25)$ (16.25)$ (15.25)$ (14.25)$ (13.25)$ (12.25)$ (11.25)$ (9.75)$ (9.25)$ (9.25)$ 191-200 140-146 (15.56)$ (15.56)$ (14.06)$ (12.06)$ (11.06)$ (10.06)$ (9.06)$ (8.06)$ (7.06)$ (5.56)$ (5.06)$ (5.06)$ 201-210 147-155 (12.91)$ (12.91)$ (11.41)$ (9.41)$ (8.41)$ (7.41)$ (6.41)$ (5.41)$ (4.41)$ (2.91)$ (2.41)$ (2.41)$ 211-220 156-163 (10.87)$ (10.87)$ (9.37)$ (7.37)$ (6.37)$ (5.37)$ (4.37)$ (3.37)$ (2.37)$ (0.87)$ 0.63$ 1.63$ 220-230 164-171 (8.17)$ (8.17)$ (6.67)$ (4.67)$ (3.67)$ (2.67)$ (0.67)$ (0.67)$ 1.83$ 3.33$ 4.33$ 4.83$ 231-240 172-178 (7.50)$ (7.50)$ (6.00)$ (4.00)$ (3.00)$ (2.00)$ -$ -$ 2.50$ 4.00$ 5.00$ 5.50$ 241-250 179-186 (7.50)$ (7.50)$ (6.00)$ (4.00)$ (3.00)$ (2.00)$ -$ -$ 2.50$ 4.00$ 5.50$ 6.50$ 251-260 187-194 (7.50)$ (7.50)$ (6.00)$ (4.00)$ (3.00)$ (1.00)$ -$ -$ 2.50$ 4.00$ 5.50$ 7.50$ 261-270 195-202 (7.50)$ (7.50)$ (6.00)$ (4.00)$ (3.00)$ (1.00)$ -$ -$ 2.50$ 5.00$ 6.50$ 7.50$ 271-280 203-209 (7.50)$ (7.50)$ (6.00)$ (4.00)$ (3.00)$ (1.00)$ -$ -$ 3.50$ 5.50$ 7.50$ 7.50$ 281-290 210-218 (8.17)$ (8.17)$ (6.67)$ (4.67)$ (3.67)$ (1.67)$ (0.67)$ (0.67)$ 2.83$ 4.83$ 6.83$ 6.83$ 291-300 219-225 (9.33)$ (8.83)$ (7.33)$ (5.33)$ (4.33)$ (2.33)$ (0.33)$ 0.67$ 2.17$ 4.17$ 6.67$ 7.17$ 301-310 226-233 (10.67)$ (10.17)$ (8.67)$ (6.67)$ (5.67)$ (3.67)$ (1.67)$ (0.67)$ 0.83$ 2.83$ 5.33$ 5.83$ 311-320 234-240 (12.67)$ (12.17)$ (10.67)$ (8.67)$ (7.67)$ (5.67)$ (3.67)$ (2.67)$ (1.17)$ 0.83$ 3.33$ 3.83$ 321-330 241-248 (14.67)$ (14.17)$ (12.67)$ (10.67)$ (9.67)$ (7.67)$ (5.67)$ (4.17)$ (2.67)$ (0.67)$ 1.33$ 1.83$ 331-340 249-255 (16.00)$ (15.50)$ (14.00)$ (12.00)$ (11.00)$ (9.00)$ (7.00)$ (5.50)$ (4.00)$ (2.00)$ -$ 0.50$ 341-350 256-263 (17.33)$ (16.83)$ (15.33)$ (13.33)$ (12.33)$ (10.33)$ (8.33)$ (6.83)$ (5.33)$ (3.33)$ (1.33)$ 0.67$ 351-360 264-271 (18.63)$ (18.13)$ (16.63)$ (14.63)$ (13.63)$ (11.63)$ (9.63)$ (8.13)$ (6.63)$ (4.63)$ (2.63)$ (0.63)$ 361-up 272-up (19.96)$ (19.46)$ (17.96)$ (15.96)$ (14.96)$ (12.96)$ (10.96)$ (9.46)$ (7.96)$ (5.96)$ (3.96)$ (1.96)$

Animal Ultsasound Sesvices (AUS) % Lean



Hormel Grid – 14 x 6Grade/Last Rib BF, in

1- 1 2 3 4 5 6Est'd LW CW <.51 .51-.70 .71-.90 .91-1.10 1.11-1.30 1.31-1.50 1.51 & Up<213 <160 61% 64% 64% 61% 60% 48% 35%213-223 160-166 83% 89% 89% 83% 75% 63% 50%224-232 167-173 91% 98% 96% 91% 83% 71% 58%233-241 174-180 101% 104% 104% 101% 95% 83% 70%242-251 181-187 103% 108% 108% 103% 97% 83% 70%252-260 188-194 103% 108% 108% 103% 97% 83% 70%261-269 195-201 103% 108% 108% 103% 97% 83% 70%271-278 202-208 103% 108% 108% 103% 97% 83% 70%279-288 209-215 103% 108% 108% 103% 97% 83% 70%289-297 216-222 102% 105% 105% 101% 97% 83% 70%298-307 223-229 100% 100% 100% 100% 95% 81% 68%308-316 230-236 86% 89% 89% 86% 80% 66% 53%317-325 237-243 80% 83% 83% 80% 74% 60% 47%326 & over244 & over 74% 77% 77% 74% 68% 54% 41%

Apr-03Red Box Quarterly Premiums:>80.0% & < 85.0 $1.00/pig>85.0% & <90.0% $1.50/pig>90.0% $2.00/pig


Excel Grid – 17 x 24

Excel Lean Value Matrix<40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63>

Under 155 67 68 69 70 71 72 73 74 75 76 76 77 78 79 80 81 82 83 82 81 80 79 78 77155-162 82 83 84 85 86 87 88 89 90 91 91 92 93 94 95 96 97 98 97 96 95 94 93 92163-169 84 85 86 87 88 89 90 91 92 93 93 94 95 96 97 98 99 100 99 98 97 96 95 94170-176 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 102 101 100 99 98 97177-184 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 104 103 102 101 100 99185-191 90 91 92 93 94 95 96 97 98 99 99 100 101 102 103 104 105 106 105 104 103 102 101 100192-198 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 106 105 104 103 102 101199-206 90 91 92 93 94 95 96 97 98 99 101 102 103 104 105 106 107 108 107 106 105 104 103 102207-213 90 91 92 93 94 95 96 98 99 101 103 104 105 106 107 108 109 109 108 107 106 105 104 103214-221 90 91 92 93 94 95 96 98 99 101 103 104 105 106 107 108 109 109 108 107 106 105 104 103222-228 89 90 91 92 93 94 95 97 98 99 101 102 103 104 105 106 107 107 106 105 104 103 102 101229-235 88 89 90 91 92 93 94 96 97 99 99 100 101 102 103 104 105 106 105 104 103 102 101 100236-242 88 89 90 91 92 93 94 95 96 97 97 98 99 100 101 102 103 104 103 102 101 100 99 98243-249 86 87 88 89 90 91 92 93 91 95 95 96 97 98 99 100 101 102 101 100 99 98 97 96250-256 85 86 87 88 89 90 91 92 93 94 94 95 96 97 98 99 99 99 99 98 97 96 95 94257-263 82 83 84 85 86 87 88 89 96 91 91 92 93 94 95 96 97 98 97 96 95 94 93 92264 & Over 67 68 69 70 71 72 73 74 75 76 76 77 78 79 80 81 82 83 82 81 80 79 78 77

Effective March 1, 2004



Farmland Grid – 15 x 10

Fat-O-Meater % Lean58.9 56.9 54.9 52.9 50.9 48.9 46.9 44.9

> 58.9 - 57.0 - 55.0 - 53.0 - 51.0 - 49.0 - 47.0 - 45.0 - 43.0 <42.9 P / DUnder 141 ($13.50) ($13.50) ($13.50) ($13.50) ($13.50) ($13.50) ($16.00) ($18.50) ($22.50) ($23.50) ($13.50)

141 - 148 ($13.50) ($13.50) ($13.50) ($13.50) ($13.50) ($13.50) ($16.00) ($18.50) ($22.50) ($23.50) ($13.50)149 - 155 ($9.76) ($9.76) ($9.76) ($9.76) ($9.76) ($9.76) ($12.26) ($14.76) ($18.76) ($19.76) ($9.76)156 - 163 ($6.00) ($6.00) ($6.00) ($6.00) ($6.00) ($6.00) ($8.50) ($11.00) ($15.00) ($16.00) ($6.00)164 - 169 $3.74 $3.74 $2.74 $1.49 $0.24 ($1.26) ($3.76) ($6.26) ($10.26) ($11.26) ($1.26)170 - 177 $5.00 $5.00 $4.00 $2.75 $1.50 $0.00 ($2.50) ($5.00) ($9.00) ($10.00) $0.00178 - 185 $5.00 $5.00 $4.00 $2.75 $1.50 $0.00 ($2.50) ($5.00) ($9.00) ($10.00) $0.00186 - 192 $5.00 $5.00 $4.00 $2.75 $1.50 $0.00 ($2.50) ($5.00) ($9.00) ($10.00) $0.00193 - 200 $5.00 $5.00 $4.00 $2.75 $1.50 $0.00 ($2.50) ($5.00) ($9.00) ($10.00) $0.00201 - 207 $5.00 $5.00 $4.00 $2.75 $1.50 $0.00 ($2.50) ($5.00) ($9.00) ($10.00) $0.00208 - 214 $5.00 $5.00 $4.00 $2.75 $1.50 $0.00 ($2.50) ($5.00) ($9.00) ($10.00) $0.00215 - 222 $2.00 $2.00 $1.00 ($0.25) ($1.50) ($3.00) ($5.50) ($8.00) ($12.00) ($13.00) ($3.00)223 - 229 ($0.26) ($0.26) ($1.26) ($2.51) ($3.76) ($5.26) ($7.76) ($10.26) ($14.26) ($15.26) ($5.26)230 - 237 ($10.00) ($10.00) ($10.00) ($10.00) ($10.00) ($10.00) ($12.50) ($15.00) ($19.00) ($20.00) ($10.00)

Over 237 ($14.76) ($14.76) ($14.76) ($14.76) ($14.76) ($14.76) ($17.26) ($19.76) ($23.76) ($24.76) ($14.76)P / D $5.00 $5.00 $4.00 $2.75 $1.50 $0.00 ($2.50) ($5.00) ($9.00) ($10.00)

Hot Carcass Weight (lb)


Morrell Grid – 10 x 13

Est'd Live Carc. 57+ 55-56 54 53 52 51 50 49 48 47 46 44-45 <43

181-200 134-148 ($9.99) ($9.99) ($9.99) ($9.99) ($9.99) ($9.99) ($9.99) ($10.99) ($11.99) ($12.99) ($13.99) ($15.99) ($19.99)

201-210 149-155 ($7.22) ($7.22) ($7.22) ($7.22) ($7.22) ($7.22) ($7.22) ($8.22) ($9.22) ($10.22) ($11.22) ($13.22) ($17.22)

211-220 156-163 ($1.94) ($2.44) ($2.81) ($3.07) ($3.44) ($3.69) ($4.44) ($5.44) ($6.44) ($7.44) ($8.44) ($10.44) ($14.44)

221-230 164-170 $4.07 $3.07 $2.32 $1.82 $1.07 $0.57 ($0.93) ($1.93) ($2.93) ($3.93) ($4.93) ($6.93) ($10.93)

231-240 171-178 $5.00 $4.00 $3.25 $2.75 $2.00 $1.50 $- ($1.00) ($2.00) ($3.00) ($4.00) ($6.00) ($10.00)

241-250 179-185 $5.00 $4.00 $3.25 $2.75 $2.00 $1.50 $- ($1.00) ($2.00) ($3.00) ($4.00) ($6.00) ($10.00)

251-260 186-193 $5.00 $4.00 $3.25 $2.75 $2.00 $1.50 $- ($1.00) ($2.00) ($3.00) ($4.00) ($6.00) ($10.00)

261-270 194-200 $5.00 $4.00 $3.25 $2.75 $2.00 $1.50 $- ($1.00) ($2.00) ($3.00) ($4.00) ($6.00) ($10.00)

271-280 201-207 $5.00 $4.00 $3.25 $2.75 $2.00 $1.50 $- ($1.00) ($2.00) ($3.00) ($4.00) ($6.00) ($10.00)

281-290 208-215 $2.50 $2.00 $1.63 $1.37 $1.00 $0.75 $- ($1.00) ($2.00) ($3.00) ($4.00) ($6.00) ($10.00)

291-300 216-222 $0.28 ($0.22) ($0.55) ($0.85) ($1.22) ($1.47) ($2.22) ($3.22) ($4.22) ($5.22) ($6.22) ($8.22) ($12.22)

301-310 223-229 ($1.39) ($1.89) ($2.22) ($2.52) ($2.89) ($3.14) ($3.89) ($4.89) ($5.89) ($6.89) ($7.89) ($9.89) ($13.89)

311-320 230-237 ($4.90) ($5.40) ($5.73) ($5.73) ($6.40) ($6.65) ($7.40) ($8.40) ($9.40) ($10.40) ($11.40) ($13.40) ($17.40)

321-350 238-259 ($8.42) ($8.92) ($9.25) ($9.55) ($9.92) ($10.17) ($10.92) ($11.92) ($12.92) ($13.92) ($14.92) ($16.92) ($20.92)

Fat-O-Meter % LeanWeight

Shaded rows are the same



Sioux-Preme Grid – As provided

Est'd Live Wt. 180-196 197-216 217-231 232-263 264-292 293-311Carc Wt. 133-145 146-160 161-171 172-195 196-216 217-230Wt Range in Column 12.9 13.9 10 22.9 19.9 12.9% LEAN60-60.9 88% 93% 101% 105% 105% 100%59-59.9 88% 93% 101% 105% 105% 100%58-58.9 88% 94% 101% 106% 106% 97%57-57.9 88% 94% 101% 106% 106% 97%56-56.9 88% 93% 101% 105% 105% 97%55-55.9 88% 93% 101% 105% 105% 96%54-54.9 88% 92% 101% 103% 103% 96%53-53.9 88% 92% 101% 103% 103% 96%52-52.9 88% 91% 101% 102% 102% 94%51-51.9 88% 91% 100% 102% 102% 94%50-50.9 88% 90% 99% 100% 100% 94%49-49.9 88% 90% 99% 100% 100% 94%48-48.9 88% 90% 98% 98% 98% 92%47-47.9 88% 90% 97% 97% 97% 92%46-46.9 88% 90% 96% 96% 96% 92%45-45.9 88% 90% 95% 95% 95% 90%44-44.9 88% 90% 94% 94% 94% 90%43-43.9 88% 90% 93% 93% 93% 90%42-42.9 88% 90% 92% 92% 92% 90%41-41.9 88% 90% 91% 91% 91% 90%40-40.9 88% 90% 90% 90% 90% 90%


Sioux-Preme Grid – Reformatted (6 x 15)

Est'd Live Wt.

Carc. Wt.

59 & Over

58-58.9

57-57.9

56-56.9

55-55.9

53-54.9

52-52.9

51-51.9

49-50.9

48-48.9

47-47.9

46-46.9

45-45.9

44-44.9

43-43.9

42-42.9

41-41.9

40-40.9

180-196 133-145 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88% 88%197-216 146-160 93% 94% 94% 93% 93% 92% 91% 91% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90%217-231 161-171 101% 101% 101% 101% 101% 101% 101% 100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90%232-246 172-182 105% 106% 106% 105% 105% 103% 102% 102% 100% 98% 97% 96% 95% 94% 93% 92% 91% 90%247-261 183-193 105% 106% 106% 105% 105% 103% 102% 102% 100% 98% 97% 96% 95% 94% 93% 92% 91% 90%262-277 194-204 105% 106% 106% 105% 105% 103% 102% 102% 100% 98% 97% 96% 95% 94% 93% 92% 91% 90%278-292 205-216 105% 106% 106% 105% 105% 103% 102% 102% 100% 98% 97% 96% 95% 94% 93% 92% 91% 90%293-311 217-230 100% 97% 97% 97% 96% 96% 94% 94% 94% 92% 92% 92% 90% 90% 90% 90% 90% 90%312-472 231-350 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85%

Percent Lean

Shaded rows are the same

Shaded columns represent the combination of two rows that are the same in the original



Compare the grids

Premium & Discount Range Carcass Est'd Live

Tyson-IBP AUS System Proprietary 50-51.9% 52% & Over -$19.96 to +$7.50 172-209 231-280

Hormel Ruler --- None BF < 1.10" -65% to +8% 174-229 233-307

Excel Fat-O-Meater Purdue/NPB None 49% & Over -33% to +9% 170-242 227-336

Farmland Fat-O-Meater SFK 49-50.9% 51% & Over -$24.76 to +$5.00 170-214 230-290

Morrell Fat-O-Meater SFK 50-50.9% 51% & Over -$20.92 to +$5.00 171-214 231-290

Sioux-Preme Ultra-FOM SFK 49-50.9% 51% & Over -15% to +6% 172-216 232-292

Packer System/Grid ComparisonNo-Discount

Weight Range

CompanyMeaurement

DevicePct. Lean Equation

Base Leanness

Leanness Premium

Range

Bottom of the ranges are about the same

Tops are quite different


Lots of difference among “optimal” hogs

Company Carcass Est'd Live

Hormel 0.51" - 0.90" 188-208 252-288

Farmland 57% & Over 170-214 230-290

Morrell 57% & Over 171-207 231-280

Sioux-Preme 57% - 58.9% 172-216 232-292

Tyson-IBP 55% & up 187-209 251-280

Excel 55-58.9% 207-221 276-295

Packer Grid "Sweetest" SpotsWeight

Lean



44 46 48 50 52 54 56 58 60 62139

186

233278

-50-45-40-35-30-25-20-15-10-505

10

$/cwt.

Pct. Lean

Carcass weight

TYSON PREMIUMS/DISCOUNTS

5-100-5-5-0-10--5-15--10


1.7 1.4 1.1 0.80.51

141

173208

243

-50-45-40-35-30-25-20-15-10-505

10

$/cwt.

Backfat thickness

Carcass Wt.

HORMEL PREMIUMS/DISCOUNTS

5-100-5-5-0-10--5-15--10-20--15-25--20-30--25-35--30-40--35-45--40-50--45


40 43 46 49 52 55 58 61141

191

242-50-45-40-35-30-25-20-15-10-505

10

$/cwt

Percent Lean

Carcass wt.

EXCEL PREMIUMS/DISCOUNTS

5-100-5-5-0-10--5-15--10-20--15-25--20


41 44 47 50 53 56 59 62141

185

229-50-45-40-35-30-25-20-15-10-505

10

$/cwt.

Percent LeanCarcass wt.

FARMLAND PREMIUMS/DISCOUNTS

5-10

0-5

-5-0

-10--5

-15--10

-20--15

-25--20


43 45 47 49 51 53 55 57 59 61 63141

185229-50

-45-40-35-30-25-20-15-10-505

10

$/cwt carcass

Percent Lean

Carcass Wt.

MORRELL PREMIUMS/DISCOUNTS

5-100-5-5-0-10--5-15--10-20--15


40 42 44 46 48 50 52 54 56 58

145

204

27250.045.040.035.030.025.020.015.010.05.00.05.0

10.0

$/cwt

Percent LeanCarcass

wt.

SIOUX-PREME PREMIUMS & DISCOUNT

5.00-10.000.00-5.005.00-0.0010.00-5.00



Other IssuesHow can I tell how my hogs will do on a packer’s measurement system?– SELL SOME HOGS TO THEM– Percent lean at Farmland and Morrell should be

very comparable – same machine, same spot, same equation

– Others are NOT linearly correlated – you can’t predict one’s grade from another’s measurments

Know how your hogs perform on one packer’s systemSplit a load to another packer TWICE


Other key questionsWhat is the plant’s:– Condemnation rate? – Trim loss rate?– Percent of lost carcasses (usually added in at the

average weight and leanness)Does the plant offer premiums for specific delivery times?


Remember – NET prices pay bills!Do not get bogged down in:– Highest base price – easy to see– Highest premiums – Lake Woebegon syndrome

Highest NET return at weights that are achievable with my system. Function of:– Base price– Premiums/discounts at various weights– Transportation costs– Marginal cost of extra pounds & days (feed,

direct labor & utilities, foregone profits?)4

Your Investment. Your Future.

Wtd. Average base price relationships

NATIONAL PRIOR DAY PURCHASE BASE PRICES

20

30

40

50

60

70

80

A-01 N-01 F-02 M-02 A-02 N-02 F-03 M-03 A-03 N-03 F-04 M-04 A-04 N-04 F-05 M-05

$/cwt. carc.

TotalNegotiatedSwine or Pork Market FormulaOther Market FormulaOther Purchase Agreement



Wtd. Average NET price relationshipsNATIONAL PRIOR DAY SLAUGHTER

NET PRICES

20

30

40

50

60

70

80

90

A-01 N-01 F-02 M-02 A-02 N-02 F-03 M-03 A-03 N-03 F-04 M-04 A-04 N-04 F-05

$/cwt. carc.

NegotiatedOther Market FormulaSwine or Pork Market FormulaOther Purchase ArrangementTotal


Future of carcass merit systemsLarger discounts are coming for heavy hogs– Pressure from retailers and restaurants on cut

sizes» Retailers: Box weights and OSHA regulations, high

package values or low cut counts per dollar of value» Restaurants: Can sell meals with small cuts for same

amount as meals with larger, more costlier cuts

– Problem is not the top of the optimal ranges – Problem is the pigs beyond the top of the ranges

Further commoditization – raising the base lean percents


This presentation and materials sponsored by:

Iowa Pork Producers AssociationNational Pork BoardYour Pork Checkoff

Documents

90 Comparing Packer Matrices 80 - Iowa State University