Marketing on Margin

2011 NPB Swine Educators Inservice

Mark Storlie ISU Swine Field Specialist 563-425-3331 or mstorlie@iastate.edu

Margin Blitz ….

Markets …

Eye on Margin …

ISU Extension Education efforts …

Markets ….

• Fundamental … – USDA Hogs & Pigs Report

– Cold Storage

– Export / Import (Live & Pork)

– USDA Crop Production

– WASDA reports

• Technical …

7/15/11

$90.77

8/21/09

$43.07

Lean Hogs

Dec LT Weekly

4/1/11

$104.35

6/5/09

$56.37

Lean Hogs

June LT Weekly

9/2/11

$7.79

6/27/08

$7.99 Corn

Dec

LT Weekly

US $

Dec

LT Weekly

US $

Dec

LT Monthly

7/01

$121.99

4/08

$71.05

Corn - Dec

US $ - Dec

Eye on margin ….

Revenue: • Market Hog $$$$ Expense: • Pig Expense - $$ • CORN - $$ • SOYBEAN MEAL - $$ = Crush Margin Remaining Expenses: • Feed Other and Additives $ 11.35 • Grind, mix deliver $ 3.62 • Veterinary and medical $ 4.15 • Labor and administration $ 5.67 • Operating interest $ 2.67 • Utilities $ 2.57 • Transportation $ 2.00 • Facilities $ 8.45

$ 40.48

Profit/Loss:

$$$

- $$

$$

www.econ.iastate

.edu/margins/

swinecrush.htm

ISU Est.

Breakeven

$40.48

ISU Est.

Breakeven

$40.48

Wean-Finish Crush Margin ($/Head) by Sale Month Pigs Placed in Next 5 Months: Wednesday Futures Prices for

Lean Hogs, Weaned Pigs, Corn and SBM

ISU Est.

Breakeven

$40.48

GT Data: Finisher (2008-2010)

Data Base

Avg.

Enter Wt. 52.13

Mkt. Wt 270.1

Mortality 3.57%

ADG 1.68

F/G 2.98

2.56 to 3.81

Feed/hd Mkt 632

Top 10%

Sort on ADG

63.57

291.8

2.11%

2.09

2.82

2.57 to 3.31

638

Top 10%

Sort on F/G

52.62

274.63

2.71%

1.81

2.67

2.57 to 2.72

579

Why have group records...

Management Decisions

• establish Cost of Production

• know the PIG CRUSH for your operation

• monitor changes in feed or medication

• evaluation of genetic sources

• compare building types

• compare contract producers

Communication

• lenders, veterinarian, labor, etc.

Mange Risk by

Managing Margin

• Cost of Production

• Budget Management

• Manage your Margin

“If you can’t measure it, then you can’t manage it.” - origin unknown

What Tools do you have in your Tool Box ???

Cash marketing Forward Contracts Futures Contracts Options Contracts

Insurance based products …

Livestock Risk Protection (LRP) Livestock Gross Margin (LGM)

Revenue: • Market Hog $$$$ Expense: • Pig Expense - $$ • CORN - $$ • SOYBEAN MEAL - $$ = Crush Margin Remaining Expenses: • Feed Other and Additives $ 11.35 • Grind, mix deliver $ 3.62 • Veterinary and medical $ 4.15 • Labor and administration $ 5.67 • Operating interest $ 2.67 • Utilities $ 2.57 • Transportation $ 2.00 • Facilities $ 8.45

$ 40.48

Profit/Loss:

$$$

- $$

$$

ISU Est.

Breakeven

$40.48

ISU Extension Education ….

• ISU Website … http://www.econ.iastate.edu/margins/

• Margin Maker Workshops … 3 to 4 hr; education and participant work with simulated marketing for 2 group of pigs (Excel)

• Risk Mgmt Seminar … Nov.-Dec. 2011, 3 locations

– Follow up – 4 to 6, 1 hr session over 6 month period via live or web. Participants will paper manage a 2,400 head finisher.

Questions …

E-mail: mstorlie@iastate.edu

Snouts & Tails - Electronic Newsletter – 6x/year

“Failing to plan is a plan to fail” - Effie Jones

Monthly Marketing Distribution

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

80's

2000's

ISU Estimated Returns Farrow to Finish, 2000-2009

Average profit per head = $4.20 2000 2001 2002 2003 2004

$9.76 $14.71 -$15.03 -$3.13 $27.64

2005 2006 2007 2008 2009

$31.42 $21.03 $3.14 -$21.53 -$26.04

Should this impact pig flow ?

Does this impact your breeding?

ISU Estimated Returns Farrow to Finish, 2000-2009

Average profit per head / month

May June July Aug Avg. Profit

$17.69 $18.78 $15.84 $12.05 $16.09

Nov Dec Jan Avg. Profit

- $9.26 - $7.54 - $4.90 - $5.86

Litter

(9 pigs

market)

$144.81

$197.55

$-52.74

Seasonal Impact

Farrowing Rate - month Farrowed (Pig ChampTM: Farrowing Rate Report)

Jan 74.00% Apr 89.00% Jul 90.00% Oct 81.00%

Feb 81.00% May 86.00% Aug 88.00% Nov 77.00%

Mar 85.00% Jun 89.00% Sep 87.00% Dec 76.00%

Farrowing Rate - month Bred

Jan 86.00% Apr 88.00% Jul 77.00% Oct 81.00%

Feb 89.00% May 87.00% Aug 76.00% Nov 85.00%

Mar 90.00% Jun 81.00% Sep 74.00% Dec 89.00%

month MARKETED - ISU Estimated Livestock Returns, Farrow to Finish,

10 yr monthly average profit

Jan $ -4.90 Apr $ 3.94 Jul $ 15.84 Oct $ -1.75

Feb $ 1.49 May $ 17.69 Aug $ 12.05 Nov $ -9.26

Mar $ 0.49 Jun $ 18.78 Sep $ 3.57 Dec $ -7.54

4 months

6 months

Bred

Farrow

MKT

Planned … Seasonal Management

Maximize Minimize

Hog Mkt May-Jun-Jul-Aug Oct-Nov-Dec-Jan

$144.81/litter $-52.74/litter

Lactation Feed Intake Jun-Jul-Aug-Sept

Breeding Target (#) Jul-Aug-Sept-Oct Dec-Jan-Feb-Mar

Observed Farrowing Nov-Dec-Jan-Feb

Quality Matings Jul-Aug-Sept-Oct

all year !!

Planned … Seasonal Management

Maximize Minimize

Hog Mkt May-Jun-Jul-Aug Oct-Nov-Dec-Jan

$144.81/litter $-52.74/litter

Quality Matings Jul-Aug-Sept-Oct

Cull Repeat Breeders Jun-Jul-Aug-Sept

Increase Gilt Pool Jun-Jul-Aug-Sept

Maternal Mating Aug-Sept-Oct-Nov Jan-Feb ?

Oxytocin in semen Jul-Aug-Sept-Oct ?