What is your best hog marketing alternative? Hogmen attending the 1976 Southwest Area Pork Producers annual meeting were encouraged by a Hormel and Company representative to consider selling on a grade and yield basis as one of their marketing alternatives

Landblom, Douglas G.

Nelson, James L.

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Hog Marketing Alternatives Selling Packer Grade and Yield VS. Selling Locally Douglas G. Landblom and James L. Nelson What is your best hog marketing alternative? Hogmen attending the 1976 Southwest Area Pork Producers annual meeting were encouraged by a Hormel and Company representative to consider selling on a grade and yield basis as one of their marketing alternatives. Since the job of raising pork isn't finished until marketing has been completed, a study was initi­ated in 1976 and completed in 1977 at the Dickin­son Experiment Station to evaluate the economics of selling market hogs at a local buying station, compared to selling on a grade-and-yield basis from the Dickinson, North Dakota, area. In this economic study, above average quality crossbred York X Hamp and straightbred Yorkshire market barrows raised at the Dickinson Station were randomly as­signed to be marketed at either the Hormel and Company plant, Mitchell, South Dakota, or Western Livestock Company, Dickinson, North Dakota. Three separate comparative marketings were made for each selling method. The hogs selected for slaughter at Mitchell, 450 miles from Dickinson, were weighed and shipped directly via a commercial livestock hauling firm. Storm-related problems were encountered during one of the two winter market­ings. Those hogs that were marketed on March 12, 1976 had originally been scheduled for shipment one week earlier. However, a severe winter storm inter­rupted normal livestock movements and arrange­ments had to be made for a later shipping date. As a result, several of the hogs became heavier than desirable. The hogs marketed locally were to be hauled directly to the Western buying station according to the project's original design. However, no measur­able shrinkage was recorded after the first group of hogs were sold locally, since the Dickinson Station is located within two miles of Western. Thus, the original design was modified and in an effort to typ­ify a regular farm marketing, the second group of hogs sold locally were weighed and transported 30 miles before being delivered to the buying station. Compared to no measurable weight loss in the first group (Table 1), an average live weight loss of 4.7 pounds per head occurred in the second group sold locally, which amounted to an average shrink­age of 2 per cent. The third group assigned to be sold locally were marketed but not actually sold, since most of them were kept for replacement pur­poses. Origin, destination weight and shrinkage, as well Landblom is assistant animal husbandman and Nelson is animal husbandman, Dickinson Branch Experiment Station. as the market value per hundred weight, have been summarized for both marketing types in Table 1. Discussion Selling grade-and-yield carcasses differs sub­stantially from selling live hogs at a local buying station. Buying stations purchase hogs in groups, sort out the obvious individuals that are either light or heavy and pay a lower price. In grade and yield marketing, however, each pig is sold on an indivi­dual basis. Those that are either under- or over­finished are bought on a calculated meat price that is determined by dividing the liveweight market value per hundred weight by a standard yield factor that is predetermined by the packer. Hormel's stan­dard yield factor was derived from the actual yields taken from a large number of hogs that were slaugh­tered in each liveweight category. In Table 2, the meat price has been calculated using the standard yield conversion factor for those hogs shipped to Mitchell. Also in Table 2, it can be seen that improper sorting of hogs to be sold on a grade-and-yield basis can result in a substantial loss. This is not to say that sorting losses can be eliminated completely. However, they can be re­duced considerably, especially when a scale is em­ployed. Grade-and-yield premiums are paid for those carcasses which possess above average quality. Carcass quality is graded on a scale from 1 to 4, and those carcasses that are considered to be of high enough quality to be given a number 1 or 2 grade are paid a premium per hundred pounds of carcass according to the schedule shown in Table 3. Any carcass graded as number three in quality is said to be standard and no premium is paid. Quality grade number 4 is reserved for over-finished hogs and a dockage of $2.00 per hundred weight is levied. Each of the three grade-and-yield marketings have been summarized in Table 4. Compared to Hormel's standard yield, pigs sold from the Dickinson Station were above average in quality and also yielded 2.5 per cent, 1.9 per cent and 1.7 per cent higher in groups I, II and III, respectively. In all cases the gross return per hun­dredweight was higher for hogs marketed grade­and-yield; however, net return was less in two of the three shipments after trucking and shrinkage ex­penses were deducted. 18 When compared on an equal weight basis of 220 pounds (Table 5), a slight net return of $.85 per head was received for the first group marketed grade­and-yield. The net return for groups 2 and 3 favored local marketing and amounted to $.61 and $1.41 more per head, respectively. Average shipping cost from the Dickinson area amounted to $3.04 per head. Shrinkage expense above that encountered with local selling amounted to an average $1.21 per head. Summary Results of this trial, after three marketings, in­dicate that there is no advantage for selling on a grade-and-yield basis from the Dickinson area. Grade-and-yield premiums contributed to a higher gross return than that received from local selling, but on the average the premiums were not enough higher to substantially offset the high cost of truck­ing and liveweight shrinkage. Although no econ­omic advantage was obtained by selling grade-and­yield from the Dickinson area, producers situated within a reasonable hauling distance of 130-175 miles may want to consider selling grade-and-yield if they are able to sort and market 30-40 butcher hogs at a time that are above average in quality and will weigh within the desirable weight range of 200-230 pounds on arrival at the packer. For those producers situated within a reasonable hauling distance and considering grade-and-yield marketing, the following guidelines should be ad­hered to: market price information should be ob­tained from the packer and the local buyer prior to shipment to determine which marketing method has the potential to yield the most return. In an attempt to avoid sorting losses when selling grade­and-yield, it is essential that each hog be weighed before shipment, and those that are too heavy should be sold locally, and those hogs that are lighter than desirable, should be continued on feed. Winter weather should be watched closely when hogs are approaching optimum market weight be­cause severe winter storms can interfere with nor­mal transportation movement, and hogs can easily become heavier than 200-230 pounds. When small or part semi-loads are being shipped commercially, trucking arrangements should be made in advance to allow the trucker ample time to arrange for live­stock to fill out the remainder of his load. Table 1. Weight summary and market value of pigs sold grade and yield vs. local marketing. Grade and Yield Local marketing Date marketed Mar 12 Oct 1 Jan 7 Mar 12 Oct 1 Jan 7 No. head 36 28 29 19 7 24 Base market value/cwt, $ 45.00 33.24 37.36 43.75 33.75 37.25 Dickinson wt., lbs. 8729 6247 7075 4459 1653 5161 A vg. wt./pig, Ibs. 242.5 223.1 243.9 234.7 236.1 215 Destination wt., lbs. 8555 6025 6770 4459 1620 Shrink, lbs. 174 222 305 33 Shring/pig, lbs. 4.9 7.9 10.5 4.7 Per cent shrink 2.02 3.5 4.3 2.0 'Pigs in this group were not actually marketed locally since they were retained for replacement purposes. Table 2. Live market price, standard yield + meat price/cwt of carcass sold grade + yield Extended Live market price Standard meat price $/cwt. Livewt. Mar 12­ Oct 1 Jan 7 yieldconv. Mar 12 Oct 1 Jan7 1976 1976 1977 factor 1976 1976 1977 170-180 43.50 31.75 35.50 .704 61.79 45.10 50.43 181-190 43.50 32.00 36.50 .709 61.35 45.13 51.48 191-200 44.50 33.00 37.50 .713 62.40 46.28 52.59 201-230 45.00 33.50 38.00 .720 62.50 46.52 52.77 231-240 44.75 33.25 37.75 .725 61.72 45.86 52.06 241-250 44.25 33.00 37.25 .727 60.86 45.39 51.23 251-260 43.75 32.50 36.75 .729 60.01 44.58 50.41 261-270 43.25 32.00 36.25 .730 59.24 43.83 49.67 271-280 42.25 31.00 35.25 .732 57.71 42.35 48.16 281-290 41.25 30.00 34.25 .733 56.27 40.92 46.73 19 Table 3. Weight categories and premiums paid for number 1 and 2 hogs. Premium $/carcass cwt. Live wt. range Carcass wt. range Mar 12 and Oct 1 Jan7 No.1 grade 180-240 128-176 +$1.75/cwt +$2.00/cwt 240-270 177-199 +$1.25/cwt +$1.50/cwt 270-330 200-245 +$1.00/cwt +$1.25/cwt No. 2 grade: 180-240 128-176 +$1.00/cwt +$1.25/cwt 240-270 177-199 +$0.75/cwt +$1.00/cwt 270-330 200-245 +$0.50/cwt +$0.75/cwt Table 4. Grade and yield summary. Market value excluding grade + yield $33.24/cwt Group I, marketed March 12th, 36 head. Market value increase for yield +$ 0.87/cwt Actual yield 6417 -;- 8555= 75.0% Market value increase for grade +$ 1.00/cwt Hormel's average standard yield= 72.5% $35.111cwt Yield increase 2.5% Local market value $33.75/cwt Market value excluding grade + yield $45.00/cwt Group III, marketed January 7,1977, 29 head. Market value increase for yield +$ O.4l1cwt Actual yield 73.8%Market value increase for grade +$ 0.73/cwt Hormel's average standard yield 72.1% $46. 14/cwt Yield increase 1.7%Local market value $43.75/cwt Market value excluding grade + yield $37.36/cwtGroup II, marketed October I, 1976, ?8 head. Market value increase for yield +$ 0.70/cwtActual yield 4456 -;- 6025= 73.96% Market value increase for grade +$ 0.76/cwt Hormel's average standard yield= 72.08% $38.82/cwt Yield increase + 1.88% Local market value $37.25/cwt Table 5. Comparison of grade and yield marketing vs. local marketing based on equal weight. Grade and yield Local selling Marketing group I II III I II III Date Mar 12 Oct 1 Jan 7 Mar 12 Oct 1 Jan 7 Live wt. value/cwt, $ 46.14 35.11 38.82 43.75 33.75 37.25 Gross return, 220 lb. hog, $ 101.51 77.24 85.40 96.25 74.25 81.95 Expenses: trucking, $ -2.77 -3.03 -3.33 -0.50 -0.50 -0.50 shrinkage, $ -2.14 -2.66 -3.67 -1.59 -1.64 Net return/head, $ 96.60 71.55 78.40 95.75 72.16 79.81 Difference, $ +0.85 +0.61 +1.41 20 

Hog Marketing Alternatives Selling Packer Grade and Yield vs. Selling Locally

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