Brown - Marketing Tools You Can Use - Vita Plus › sites › default › files › Brown...Employee-Owned • 1.800.362.8334 • Tools You Can Use • Overview – Marketing the right

Employee-Owned • 1.800.362.8334 • www.vitaplus.com

Marketing Tools You Can UseNate Brown

Swine Summit 2010


Marketing Tools You Can Use • Overview

– Marketing the right pigs at the right time to the right market is a Big Picture management issue

– Opportunity for adding dollars per pig directly to your bottom line

– This presentation is designed to provide you with the tools to capture that opportunity


Marketing Tools You Can Use• “Pre-Seminar” Quiz

– Jot down your best estimate of the ideal market weight to sell your pigs

– Estimate the opportunity cost of selling pigs 10 lb too light

– Estimate the opportunity cost of selling pigs 10 lb too heavy


Objectives• Discuss the concept of optimal market

weight• Examine methods for determining farm

specific optimal market weight• Analyze the economic impact of optimal

market weight • Talk about methods for executing a

practical marketing strategy that helps achieve optimal market weights


Marketing Tools You Can Use• Credits

– KSU Marketing Weight Predictor & Template• www.asi.ksu.edu

– i Production• Market Sales Summary report

– mentor• Feed budget and growth model

– Vita Plus Market Weight Predictor spreadsheet


Part 1Discussing the Concept of Optimal

Market Weight


This pig is not the optimal weight!


Optimal Market Weight• Definition

– Vita Plus Accounting 101• Sales – Expenses = Profit

– Optimal Market Weight is similar• Revenue – Cost

– At what market weight is this the greatest?• Affected by many variables – packer grid, market

price, feed costs, genetic/carcass/lean factors, feed efficiency, facility cost, etc.

• Single Pig, Top Out Loads and Average Loads all have differing optimal market weights


Optimal Market WeightCarcass Feed cost

base, $/cwt $/tonIncremental 70.00$ 160.00$

Market Base Gross Feed usage Market Opportunity OpportunityWeight, lb $/pig Gross-base $/pig $/pig F/G Feed, lb Weight, lb on tops for avg wt

230 120.75$ (3.62)$ 117.13$ 230235 123.38$ 0.23$ 123.61$ 3.50 17.5 235 26.92$ 24.11$ 240 126.00$ 3.66$ 129.66$ 3.54 17.7 240 21.85$ 19.35$ 245 128.63$ 6.63$ 135.26$ 3.58 17.9 245 17.21$ 15.02$ 250 131.25$ 9.11$ 140.36$ 3.62 18.1 250 13.04$ 11.17$ 255 133.88$ 11.07$ 144.94$ 3.67 18.3 255 9.39$ 7.82$ 260 136.50$ 12.46$ 148.96$ 3.71 18.5 260 6.27$ 5.02$ 265 139.13$ 13.25$ 152.37$ 3.75 18.8 265 3.74$ 2.80$ 270 141.75$ 13.40$ 155.15$ 3.79 19.0 270 1.83$ 1.20$ 275 144.38$ 12.88$ 157.25$ 3.83 19.2 275 0.57$ 0.26$ 280 147.00$ 11.64$ 158.64$ 3.88 19.4 280 0.16$ 0.47$ 285 149.63$ 9.66$ 159.29$ 3.92 19.6 285 1.08$ 1.71$ 290 152.25$ 6.90$ 159.15$ 3.96 19.8 290 2.80$ 3.74$ 295 154.88$ 3.32$ 158.19$ 4.00 20.0 295 5.36$ 6.61$ 300 157.50$ (1.13)$ 156.38$ 4.04 20.2 300 8.79$ 10.36$


Optimal Market Weight

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300Weight, lb

$/pi

gOpportunity on tops

Opportunity for avg wt


Optimal Market Weight – Packer Matrix Influence

Hormel @ $70/cwt carcass and $160/ton feed

$-

$1

$2

$3

$4

$5

$6

$7

240 250 260 270 280 290Weight, lb

$/pi




Optimal Market Weight – Packer Matrix Influence

Tyson at $70/cwt carcass Base Price and $160/ton feed

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300 310 320 330Weight, lb

$/pi

g

Opportunity on tops



Optimal Market Weight – Market Price Influence

Tyson @ $85/cwt carcass and $160/ton feed

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300 310 320 330Weight, lb

$/pi




Optimal Market Weight – Market Price Influence

Tyson @ $55/cwt carcass and $160/ton feed

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300 310 320 330Weight, lb

$/pi

g

Opportunity on tops



Optimal Market Weight – Feed Cost Influence

Tyson at $55/cwt carcass and $120/ton feed

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300 310 320 330Weight, lb

$/pi

g

Opportunity on tops



Optimal Market Weight – Genetic (carcass) Influence• Same Farm

– Two pig flows with slightly different genetics (same company, different lines)– Similar nutrition program– Same Packer

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300Weight, lb

$/pi

g

Opportunity on tops


Line “A” @ $65 and $160

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300Weight, lb

$/pi

g

Opportunity on tops


Line “B” @ $65 and $160


Part 2Designing Farm Specific

Optimal Market Weight Curves


Optimal Market Weight• Developing Farm Specific Optimal Market

Weight Curves– Basic premise

• On a load by load basis (kill sheet), determine Gross value – Base Price

– Gross value = Base Price + Lean Premium – Sort +(-) Other alterations– Does not include trucking or check-off

• Graph the difference between Gross Value and Base Price against Market Weight

• Run a quadratic regression equation through the data


Optimal Market Weight• Determining Farm Specific Curves –

options for handling kill sheet data– Hand enter kill sheet data into KSU Market

Weight Template– Copy/Paste electronic packer data into

template– i Production Market Sales report– Other data bases?


Determining Farm Specific Curves – KSU Template

Morrell DateNumber of pigs

Grade & Yield base, $/cwt

Avg live weight, lb/pig

Actual yield, %

Carcass weight, lb/pig

Sort loss, $/cwt

Lean value/ca

r cwtLive value,

$/cwtValue/Car Cwt

Morrell 12/15/2005 57 56.82$ 255 75.16% 191.7 (1.38)$ 2.37$ 43.45$ 57.81$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$ Morrell 0.0 #DIV/0! -$


Determining Farm Specific Curves – i Production Market Sales Summary Report

Packer Paid Live Wt

Avg Live Wt

Paid Carcasse

s

Base Value/H

d

Total Value/Hd

Swift 40890 246.3 166 $129.54 $132.51Swift 46430 252.3 184 $132.56 $131.54Swift 52310 276.8 189 $146.32 $141.53Swift 1420 202.9 7 $0.00 $45.12Swift 49935 269.9 185 $145.04 $144.81Swift 44135 256.6 172 $138.52 $140.27Swift 43840 249.1 176 $131.47 $131.37Swift 7455 248.5 30 $99.28 $97.47Swift 710 236.7 3 $126.43 $129.89Swift 37015 251.8 147 $100.69 $101.40Swift 44290 251.7 176 $136.14 $136.47Swift 920 230.0 4 $91.49 $94.14Swift 46180 256.6 180 $133.95 $135.60Swift 44940 251.1 179 $130.54 $134.95Swift 42565 240.5 177 $126.45 $129.30Swift 44685 249.6 179 $130.66 $132.16Swift 41955 241.1 174 $124.86 $126.27Swift 46495 254.1 183 $126.01 $128.97


Determining Farm Specific Curves –Develop Regression Equation from the data

Gross Value - Base Value (per head) By Live Weight

y = -0.0065x2 + 3.4678x - 455.84

-$6.00

-$4.00

-$2.00

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

220.0 230.0 240.0 250.0 260.0 270.0 280.0 290.0

Live Weight

Gro

ss -

Base

(per

hea

d)


Determining Farm Specific Curves – Enter Regression Equation Data into KSU Market Weight Predictor

Parameters for $/cwt premium (net price-base price) as influenced by weightIntercept -455.84x 3.4678x2 -0.0065x3

Carcass Feed costbase, $/cwt $/ton

Incremental 70.00$ 160.00$ Market Base Premium Gross Feed usage Market Opportunity Opportunity

Weight, lb $/pig Gross-base $/pig F/G Feed, lb Weight, lb on tops for avg wt230 120.75$ (3.62)$ 117.13$ 230235 123.38$ 0.23$ 123.61$ 3.50 17.5 235 26.92$ 24.11$ 240 126.00$ 3.66$ 129.66$ 3.54 17.7 240 21.85$ 19.35$ 245 128.63$ 6.63$ 135.26$ 3.58 17.9 245 17.21$ 15.02$ 250 131.25$ 9.11$ 140.36$ 3.62 18.1 250 13.04$ 11.17$ 255 133.88$ 11.07$ 144.94$ 3.67 18.3 255 9.39$ 7.82$ 260 136.50$ 12.46$ 148.96$ 3.71 18.5 260 6.27$ 5.02$ 265 139.13$ 13.25$ 152.37$ 3.75 18.8 265 3.74$ 2.80$ 270 141.75$ 13.40$ 155.15$ 3.79 19.0 270 1.83$ 1.20$ 275 144.38$ 12.88$ 157.25$ 3.83 19.2 275 0.57$ 0.26$ 280 147.00$ 11.64$ 158.64$ 3.88 19.4 280 0.16$ 0.47$ 285 149.63$ 9.66$ 159.29$ 3.92 19.6 285 1.08$ 1.71$ 290 152.25$ 6.90$ 159.15$ 3.96 19.8 290 2.80$ 3.74$ 295 154.88$ 3.32$ 158.19$ 4.00 20.0 295 5.36$ 6.61$ 300 157.50$ (1.13)$ 156.38$ 4.04 20.2 300 8.79$ 10.36$


The Results – a Farm Specific & Packer Specific Optimal Market Weight Curve

$-

$1

$2

$3

$4

$5

$6

$7

230 240 250 260 270 280 290 300Weight, lb

$/pi


Opportunity for avgwt


Part 3Analysis and Economic

Implications of Optimal Market Weight in the Real World


Optimal Market Weight in the Real World

• Examined the market hog data base from 3 operations (i Production Market Sales Summary)

• Developed an Optimal Weight Curve for each farm

• Plotted the Optimal Weight against load by load data for 2009


Optimal Market Weight in the Real World

Average Opportunity Cost/pig for 2009 Marketings

$4.44

$1.17

$2.93

$-

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

Farm A Farm B Farm C

Opp

ortu

nity

Cos

t $/p

ig


Optimal Market Weight in the Real WorldOpportunity Cost Per Load

$-

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00

$1,600.00

$1,800.00

$2,000.00

Opp

ortu

nity

Cos

t $/L

oad


Optimal Market Weight in the Real World Are we selling too light or too heavy?

2009 MarketingsAvg Live Wt by Load

200

210

220

230

240

250

260

270

280

290

300

310

320

330

10/29/2008 12/18/2008 2/6/2009 3/28/2009 5/17/2009 7/6/2009 8/25/2009 10/14/2009 12/3/2009 1/22/2010


Optimal Market Weight in the Real World Are we selling too light or too heavy?

2009 Marketings Avg Live Wt by Load

200

210

220

230

240

250

260

270

280

290

300

310

320

10/29/2008 12/18/2008 2/6/2009 3/28/2009 5/17/2009 7/6/2009 8/25/2009 10/14/2009 12/3/2009 1/22/2010


Optimal Market Weight in the Real World When are we selling too heavy or too light?

Entire FarmAvg Live Wt for Top Out (1st Cut) Loads 2009

200

210

220

230

240

250

260

270

280

290

300

310

320

12/18/2008 2/6/2009 3/28/2009 5/17/2009 7/6/2009 8/25/2009 10/14/2009 12/3/2009 1/22/2010



Average Market Weight per Load for One Finishing GroupOpportunity Cost for the Group = $1903 ($1.74/head)

245

250

255

260

265

270

275

280

1 2 3 4 5 6 7 8

Load #

Ave

rage

Liv

e W

eigh

t (lb

)



Average Market Weight per Load for One Finishing GroupOpportunity Cost for the Group = $5561.35 ($2.49/head)

240245250

255260265270275280

285290295

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Load #

Ave

rage

Liv

e W

eigh

t (lb

)


Part 4Strategies to Capture the Potential

of Optimal Market Weight


Optimal Market Weight Strategies• Strategies to Capture Opportunity

– Selling too light?• Selling too light is often a system issue

– Not enough space– Growth rate not matched up with available space

» Health, feeding program, etc..– Perceived “ideal” selling weight to hit premium grid

– Selling too heavy?• Selling too heavy is often an execution problem

– Ineffective “trigger” to top out barns– Poor communication between management and load out crew– Packer scheduling issues

• Different strategies for each situation


Optimal Market Weight Strategies• Strategies to deal with selling too light

– Additional finishing space• Stocking density• Add barns to add time

– Increase Paylean usage– Increase dietary energy– Heat abatement

• Run cost:benefit analysis to determine potential payback


Optimal Market Weight StrategiesDealing with Selling Too Heavy

• Good communication between management and load out crews– Actual kill sheet– Electronic data provides opportunity to format kill

sheet data into useful information


Optimal Market Weight StrategiesCommunicating Kill Sheet Data

Number of Head per Weight RangeSingle Kill Sheet

0

5

10

15

20

25

30

185 190 200 205 210 215 220 225 230 235 240 245 250 255 260 265 270 275 280 285 290 295 300 305 310 315 320 325 335

Live Weight (lb)

Num

ber

of h

ead


Optimal Market Weight StrategiesDealing with Selling Too Heavy

• Develop a more effective “trigger” to start topping barns– Commonly used marketing triggers

• Scale barns• Portable scales• Days on feed• Eye ball• Holy crap those pigs are big!


Optimal Market Weight Strategies• Drawbacks of common marketing triggers

– Scale barns• Can be very useful in managing market weights• Depending on design, may affect ADG • Most pigs don’t live in scale barns

– Days on Feed• ADG is highly variable (leading to holy crap moments)

– Portable scales• Lots of work• Bio-security

– Eye Balling pigs• I am terrible at judging pig weights


Optimal Market Weight Strategies

• Another Option for a Market Weight Trigger – A multi-phase Feed Budget – Feed Efficiency is a more reliable method

than ADG (Days on Feed) for predicting pig weight

– Vita Plus’ mentor program provides a convenient format to assess the average weight of a group of pigs


Optimal Market Weight Strategies• mentor features that help in predicting

average weight of group– Farm specific growth model drives the budget– Budget is group specific– Budget is dynamic

• Changes with feed delivery amounts• Changes with group inventory

– Budget is multi-phase (vs. 5 phase)• Every feed delivery is tied to a projected group

average weight


Optimal Market Weight StrategiesUsing mentor as a trigger


Optimal Weight Strategies• Using mentor as a marketing trigger

– Monitor feed budgets in late finishing groups– Refer to the mentor budget to find the current

average group weight– Plug the current average weight into the Vita

Plus Market Weight spreadsheet– Assess whether the group needs to be topped

out in relation to Optimal Market Weight– Excellent tool to prevent selling heavy


Optimal Weight StrategiesFirst Cut Market Weight Table

Enter data in shaded cells

Group ID ExampleSite Site 1Barn Barn 1

Group Size - # of head 1000Current Average Weight of Group 220Coefficient of Variation in the Group % 10%

Weight Ranges 230-240 240-250 250-260 260-270 270-280 280-290 290-300 300-310

Number of Pigs In Weight Range 143 95 52 23 8 2 1 0

First Cut Market Weights

143

95

52

23

82 1 0

0102030405060708090

100110120130140150160

1

Num

ber o

f Pig

s

230-240 240-250 250-260 260-270 270-280 280-290 290-300 300-310


Marketing Tools You Can Use• Summary

– Consistently selling pigs near the Optimal Market Weight adds dollars per pig to your bottom line

– The specific Optimal Market Weight for your operation is affected by several variables

– The data and tools are available to develop Optimal Market Weight curves for your situation

– There are methods available to help you consistently hit optimal market weights

– The Vita Plus Swine Team is able to help you utilize these tools to improve your bottom line


Marketing Tools You Can Use• Questions/Comments

• Thank you

Documents

Brown - Marketing Tools You Can Use - Vita Plus › sites › default › files › Brown...Employee-Owned • 1.800.362.8334 • Tools You Can Use • Overview – Marketing the right