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

2. 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

3. What is $LOT

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

5. 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.

6. 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.

7. 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.

8. What is Margin Over Feed?

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

10. 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

11. Historical Margin Over Feed At 270 Pounds

12. Projected Margin Over Feed at 270 Pounds Upcoming 12 Months

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

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

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

16. $LOT IPC Versus Tyson – Medium Margin Over Feed

17. How can $LOT be used as a marketing tool?

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

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

20. 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

21. Projected Profit Per Head Next 12 Months

22. How Were Feed Costs And Market Prices Determined?
Based on 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

23. 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 market close

24. 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 market close. By lean hog contract period

25. 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 market close. By lean hog contract period

26. 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 market close. By lean hog contract period

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

28. 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.

29. Projected Target Market Weights

30. What are Current Target Weights?

31. $LOT IPC Cash

32. $LOT Tyson Cash

33. Day-to-Day Marketing Feedback

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

35. 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

36. 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

37. Marketing Feedback Example

38. 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

39. Upcoming Market Considerations

40. Upcoming Market Considerations
Fall growth approaching

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

42. 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

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

44. 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?

45. 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