Maximize Profitability: Tips from Big Stone Marketing

Stevens_BrianWith the cash hog market run up, volatility in the futures market, and the unknown marketing hole created from PEDv, it definitely makes for interesting times.  The key for hog producers to take advantage of the situation and to maximize profitability is to focus on margin over feed cost.  Right now, with the current hog market and feed costs, target market selling weights are at an all-time high regardless of which packer you sell to.  In fact, hog weights just keep setting records. The average live weight of barrows and gilts in Iowa-Minnesota May 1st was 287.5 pounds and was the record high for the sixth consecutive week.  This was up 1.1 pounds from a week earlier and up 9.5 pounds from a year ago. Prior to early November, we had NEVER in history seen a week with Iowa-Minnesota average live weights above 280 pounds.

Since then we have not had a week with weights below that level.  Even with these record weights our “optimizer” model currently says the target market weights, where margin over feed cost is maximized, is at around 300 pounds for most packers.  Based on economics, producers will try to push weights up even further.  With the summer heat and normal expected seasonal drop in weights, it will be difficult to accomplish for most.  Also, make sure as you take your hog market weights higher that you understand your packer’s “maximum” allowed weight as all packers will sort out the extreme heavy hogs and implement significant discounts and that will defeat what you are trying to accomplish by adding weight.  For assistance with your marketing strategy, please contact Big Stone Marketing at 507-825-7030.