Market Weight Trends/Implications

Transcription

1 Market Weight Trends/Implications Dr Mike Brumm Brumm Swine Consultancy, Inc. North Mankato, MN 25,000 Market Inventory 6 Leading States - 75% of US on 12/1/14 Dr Mike Brumm BSC, Inc Ia NC Mn Il In Ne 20,000 15, Head 10,000 5,000 - USDA Report 1

2 Quarterly USDA Hogs and Pigs Kept for Market 70,000 62,135,000 9/1/08 62,384,000 9/1/12 65,000 60,081,500 Market, 000 Hd 60,000 55,000 50,000 y = x R² = ,000 40,000 Normally Mar is down 1 2 million from Dec Date 27 Yrs of Grow Finish Improvements SGraphics 1987 PigCHAMP 1995 PigCHAMP 2000 MetaFarms 2013 Pork.org 2013 In wt Out Wt ADG F/G Mortality 3.0% 3.0% 4.1% 4.4% 5.0% 36 lb heavier pig at sale 168 lb less feed 2

3 IA-SMN Liveweight at Slaughter Lb Week of Year 225 Barrow/Gilt Carcass Weight 2015 vs lb LM_HG d week day 3

4 vs 2014 Wkly B&G Carcass Wt LM_HG Carcass Wt Lb LM_HG201 Packer Owned Producer Sold 4

5 More Pigs and Bigger Pigs Federally Inspected B & G No. Hd Carcass Wt No. pigs y = x R² = , hd Lb Weight/hd y = x R² = USDA Agricultural Statistics Annual US Market Pig Slaughter Plants x x x x x x x x x x x x x x x x x x x x x x x x x x X Double Shift Kill X Single Shift Kill >7500/d 5

6 More Pigs and Bigger Pigs 2025 Trend Line Slaughter Wt 220 lb 75% yield = 293 lb live weight Barrow & Gilt Slaughter million hd Equivalent to adding 1 kill shift to slaughter plant every 2.5 yrs Future Production Goals From weaning to slaughter 2 lb/d daily live weight gain 2:1 feed:gain live weight gain feed conversion Corrected 1550 kcal/lb diet ME basis Slaughter weights will continue to increase 6

7 Nate Brown Vita Plus Corporation 2015 Swine Summit Dictionary.com definition of throughput The quantity of raw material processed within a given time If it were only that simple in pork production! We deal with constantly changing variables when dealing with throughput Market Weights, Market Prices, Feed Costs, Environmental Influences, Pig Health, ADG, etc., Given all of these variables, optimizing throughput is a challenge 1

8 What is the objective of your business? Sell pounds of pork (carcass) for more money than it costs you to produce it Sales Expenses = Profits My objective for this presentation is to share some ideas regarding the impact that throughput has on the Profitability of your operation The Sales (revenue) side of the Profit Equation Pounds sold * Market Price = Revenue Market Price is variable Not only variable day to day, but variable within a load of pigs due to packer grid programs Weight, lean %, etc. The variation in price received is one of the challenges of optimizing throughput 2

9 The Expense side of the Profit Equation Wean to Finish perspective Cost of the pig Cost of feed Cost of housing & labor Other Health, trucking, etc. Feed is a variable expense Rate of use & conversion into raw product Price per unit These variables in our key input make optimizing throughput a challenge My Goal develop a method of helping Vita Plus customers make better big picture production decisions regarding the impact of throughput Some Big Picture Considerations: Market weights & Market weight variation (within load) Days on feed (add/reduce barns?) Pig Flow (location days, time to fill) Value of ADG modifiers (increase or decrease) 3

10 A basic tenet of most production industries is that improving throughput is beneficial we always want to improve (don t we?) Improving throughput (Dictionary definition) More pounds in the same time period Same pounds in a shorter time period Which combination optimizes profit? More pounds (increasing throughput) does not always improve profits in pork production we want to optimize throughput! 4

11 Challenge dealing with a variable population of raw material 1000 head, unsorted, 240 lb avg wt, 11% CV Challenge when we sell, we are dealing with Live Weight Distribution variation 160 head load 288 lb avg $ differences at various wts Qty Weights 5

12 Modeling a theoretical Group of pigs to manage some of the variables 1020 head wean to finish group 1000 head $42,000/year contract includes everything Weaned Pig 0% death loss and 6 load perfect market sort raising pigs in a computer is easy! Selling into a Heavy Packer Grid (300 lb Single Pig Optimum live weight) Production Scenario 13 lb in Weight $70/cwt Hog Market, $160/ton GF feed We are going to What if this group to measure the impact of improving ADG and/or adding days (altering throughput) 6

13 $90,000 $85,000 $80,000 Margin over Feed Costs per 1000 Head Group by DOF (1.60 ADG) $87,132 $85,369 $80,130 $75,000 $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40, Days on Feed $100,000 Margin over Feed & Fixed Costs $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 Weaned Pig Cost Facility Cost/group Total "Fixed Cost"/ group MOFC $20,000 $10,000 $ Days on Feed 7

14 $25,000 $24,500 $24,000 Margin over Feed & Fixed Cost per Group (1.60 ADG) $24,659 $24,122 $23,500 $23,000 $22,500 $22,000 $21,720 $21,500 $21,000 $20,500 $20, Days on Feed The M:FFc Ratio Margin:Feed & Fixed Costs Measurement of dollars of margin generated per dollar of expenditures If I give you a $1 in resources, how much margin will you generate? Resources = pig, building (time), labor, & feed Margin impacted by how many pigs you sell (Deads & culls%), what they weigh (total pounds & variable value), how long it took them to reach those weights and how did they convert feed into pounds How well are we converting resources into margin? 8

15 M:FFc Ratio (1.60 ADG) Days on Feed M:FFc Ratio by Varying ADG 180 DOF) R a t i ADG 9

16 M:FFc Ratio by varying ADG & DOF ADG/160 Days 1.50 ADG/180 Days 1.50 ADG/200 Days 1.60 ADG/160 Days 1.60 ADG/180 Days 1.60 ADG/200 Days 1.70 ADG/160 Days 1.70 ADG/180 Days 1.70 ADG/200 Days Implications M:FFc Ratio Indicator of the relative value of throughput In our scenario: Even though adding days beyond 180 increased pounds sold and MOFC, it did not improve over all profitability when Fixed Costs were considered However, improving WF ADG from 1.50 to 1.70:» Resulted in $8 per pig improved profit with short days on feed» Resulted in $3.50 per pig improved with average days on feed» Resulted in only $1.20 per pig improved profit with extra days available 10

17 Implications Practical considerations to optimize throughput in your operation Are you short or long on space right now? (the reality for most of you is the space you have now is the space you have) Should you add (or lose) spaces in the future? Do you sell into a heavy or light grid? How well are you hitting that grid? Are there opportunities to improve ADG? At what cost? Is my feeding program geared to optimize throughput? And so on The next step Scoring Groups on M:FFc Ratio as part of the close out process In my opinion, this has the potential to be an excellent indicator on over all group performance production and financial The calculation takes into account the following: ADG, DOF (facility cost), Market Weights by load, Market Weight variation by load, Deads & Culls, Feed Use & Cost 11

18 Applying the M:FFc Ratio to actual groups Standardize key market factors Hog Market at $70/cwt carcass GF Feed $160/ton 290 (live lb) target load weight packer grid Putting it all together which group is the best (lots of things to consider.) Group A Group B Group C ADG F:G % Marketed 92.2% 94.9% 90.0% Avg Market Wt (live lb) 290 is the target Avg Market CV% 6.60% 6.90% 6.40% Square Footage/pig Location Days

19 The results when applying the M:FFc Concept: Group A Group B Group C Standardized Margin over Feed & Fixed Costs ($/pig Started) $ $ $ M:FFc Ratio Why did Group A win (make more money)? Marketed better than Group A in terms of market weight and variation within loads Initial stocking density off set the lower % marketed Looking at it another way, whoever managed Group B took a great group of pigs and gave it all away due to poor marketing How will you manage these growers/employees? What will you focus on? Would scoring groups like this help your operation? 13

20 Summary There are a lot of moving parts in pork production Making sound short and long term decisions to improve bottom line performance is complicated Traditional metrics like ADG and F:G, while very important, don t always tell the whole story and may lead to incorrect decisions for your production system Analysis of Next Generation metrics like MOFC and Optimized Throughput can be powerful tools for better decision making Thank you for indulging my inner Pig Data Nerd 14

21 Continued Dr. Mike Brumm Sensible Plus Latent Heat Production by Growing Pigs Prior to Brumm estimate Btu/hr Watt Pig Wt, kg 1

22 280 lb Pig Close to 1200 Btu/hr heat production 800+ Btu/hr sensible heat 400 Btu/hr latent heat Pigs are more sensitive to heat than they used to be As pigs produce more heat Upper critical temperatures are lower than most think Summer heat relief will become even more important Ventilation systems move thru stages faster What about lower critical temperature? What is the correct set point? 2

23 South Central Minnesota Daily Minimum Daily Maximum 3

24 Expressing space as a function of Bodyweight Allometric equation for floor space allowance Area = k * BW 2/3 k = Area / BW 2/3 Courtesy Dr. Harold Gonyou, Prairie Swine Centre 104% Gonyou et al, 2006 ADG Response to 'k' full slats constant group size - metric 100% ADG % of Control 96% 92% 88% 84% 'k' 4

25 Gonyou et al Gonyou et al

26 Critical Space (full slats) at k = kg m 2 /pig lb ft 2 /pig kg, 0.58 m lb, 6.3 ft 2 k = k =

27 123 kg, 0.74 m lb, 8.0 ft 2 k = k = kg 0.76 m Vita 2 /pig 225 lb 8.2 ft Plus Swine Summit 2015 Drive 2 /pig Forward k = k =

28 For each 3% change in space, daily gain and daily feed intake change 1.0% for full slats. There is no predictable impact of space allocation on feed/gain. Impact of Space on ADG Full slats Wt Lb Adequate ft 7.2 ft2 Reduction in ADG % % % % 8

29 2007 pig eating from 1995 feeder 9

30 Feeder Types Common to US Dry Wean Finish Wet/Dry Tube Feeders My best guess worse f/g than dry or wean finish 10

31 Pig Shoulder Width Petherick, 1983 Width = x BW 0.33 Wt, kg Width, mm X 1.1 Wt, lb Width, in X Canadian Code of Practice for the Care and Handling of Pigs Pig Wt, lb. Feeder Eating Space Width, in

32 Critical Feeder Dimensions Gonyou and Lou (90 kg pigs; 1997) Depth 10 Inches minimum 12.6 ideal for 213 lb pigs Lip Height 4 5 inches Width Shoulder x pan floor Sell to Cargill, Triumph or Tyson 6 hole, 84 feeder 12

33 Getting Feeder Dimensions Right 10 in 6+ in 15 in 5 in Do you know your feeder dimensions? 10 in 12 in 7 in 13

34 4 in 9.5 in March,

35 April, in New Feeders aren t perfect 4 hole 50 feeder = 12.5 /hole 5 hole 60 feeder = 12 /hole 6 hole 70 feeder = 11.7 /hole 15

36 Grow-Finish Feeders Meal diets Recommended Stocking Densities Quality Dry Feeder 8 10 pigs/space /pig minimum 15 /1.7 = 8.8 pigs/space Wet/dry >12 pigs/space CrystalSprings recommends upwards of 15 Tube? PIC Recommendations 11 pigs/side/drop 2 /pig trough length/pig 51 mm/pig Pellets vs meal pigs eat faster on pellets Gating and Aisles Most are now going with 35 minimum gating height between pens 36 aisles so 2 pigs can pass 16

37 A conclusion is the place where you got tired of thinking. Steven Wright Impact of Heavy Market Weights on Facilities and Equipment Dr Mike Brumm Brumm Swine Consultancy, Inc North Mankato, MN Blog: Mnpork.com 17