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

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

What is $LOT

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

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.

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.

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.

What is Margin Over Feed?

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

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

Historical Margin Over Feed At 270 Pounds

Projected Margin Over Feed at 270 Pounds Upcoming 12 Months

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

$LOT Tyson – Low, Medium and High Margin Over Feed

$LOT IPC – Low, Medium and High Margin Over Feed

$LOT IPC Versus Tyson – Medium Margin Over Feed

How can $LOT be used as a marketing tool?

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

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

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

Projected Profit Per Head Next 12 Months

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

Profit Per Head Cash $65.50 $3.25 $355 $217 $28.15 $51.80 $68.10 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

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

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

Profit Per Head Summer 2017 $75.58 $74.05 $3.63 $3.72 $342 $341 $227 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

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

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.

Projected Target Market Weights

What are Current Target Weights?

$LOT IPC Cash

$LOT Tyson Cash

Day-to-Day Marketing Feedback

Day-to-Day Marketing Feedback Timely Return to farm day after marketed

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

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

Marketing Feedback Example

Marketing Feedback Example Farm Site Load 7 Total % of total Date 8/10/16 Days PW 170 162 Truck dead 1 Down or subject Sort G/L $0.27 $1.44 Live wt 293 280 Carcass wt 224 215 Carcass base $68.42 $72.23 < 164 < 215   0.1% 164 to 177 215 to 232 2 10 1.0% 178 to 207 233 to 271 317 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% 155 1029 $LOT $831 $4,918 $LOT/pig $5.36 $4.78

Upcoming Market Considerations

Upcoming Market Considerations Fall growth approaching

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

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

For Projected Fall Markets Lower $LOT Loss If Lighter Than Target Versus Heavier

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?

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