Marketing Swine

1. Marketing Swine

2. Objectives • Describe three methods of marketing hogs • List and describe the grades of market hogs • List and describe grades of feeder pigs

3. Making the right marketing decisions can mean the difference between profit and loss for the hog producer • Producers must carefully study the kinds of markets that are available • Price offered, costs, reliability of the hog buyer

4. It is often hard to evaluate different markets on the basis of price • Many factors influence the price • Supply of hogs and the demand for hogs can vary from market to market on any given day • The costs can also vary • The producer must calculate as closely as possible the highest net return that can be obtained for the hogs in each available market • Choose the market giving the highest net return to the producer

5. Producers of high-quality, meaty hogs will generally get better returns by selling on a grade and yield basis • An increasing number of hogs are being sold on a grade and yield basis • Consumer demand for less fat in red meat has put pressure on the swine industry to produce leaner hogs • Grade and yield marketing provides a price mechanism to reward producers who raise the kind of hogs that are in demand

6. A problem with grade and yield marketing • The limited ability of packing plants to evaluate hog carcasses on a large scale • May have equipment in the future that can grade them quickly • Heavy hogs and cull breeding hogs usually sell better at terminal markets or auctions • Or they are sold by direct-marketing methods

7. Pork Promotion • The Pork Promotion, Research and Consumer Information Act of 1985 • Established a National Pork Board that collects funds through an assessment of 45 cents per $100 value of pork sold in the United States • Funds are used to promote the use of pork, develop foreign markets, provide consumer information, and conduct research and producer education programs

8. Kinds of Markets • Hogs may be sold through • Direct marketing • Terminal markets • Auction markets • Some hog producers participate in group marketing • Generally, the group markets the hogs through one of the three methods just listed

9. Direct Marketing • Involves selling to packing plants, order buyers, or country buying stations • In this system, the producer deals directly with the buyer • The producer must possess selling skills and a knowledge of the markets to be successful in obtaining the best price for the hogs • Accounts for the majority of the hogs sold in the United States • Animals are transported shorter distances • Shrinkage is less

10. Terminal Markets • Hogs are cosigned to a commission firm • Commission firms can help the producer select the best time to market hogs • There are usually several buyers competing for hogs on the terminal market • This may produce a better price • Prices may vary more widely on the terminal market than in direct marketing • This variation is affected by the number of hogs coming on the market on any given day • Less than 1% of the slaughter hogs sold in the U.S. are marketed through terminal markets

11. Auction Markets • In some areas, auctions markets are an important method of selling hogs • Some auction markets are developing new systems to obtain more buyers for the hogs offered • Telephone hookups and video auctions • Most auction markets have hog sale days once or twice a week • Limits the producer in choosing the day on which to market the hogs • Transportation costs and shrinkage are less • Selling costs involved with terminal and auction markets

12. Group Marketing • Some producers use systems of group marketing • Have been established by some major farm organizations • Hog marketing cooperatives also exist in some areas • Some of these groups negotiate contracts with packers to supply hogs • The basic purpose is to obtain higher prices for hogs • The bargaining power of the producer may be increased by using a group marketing method

13. Pricing Methods • Approximately 70% of the market hogs sold in the U.S. are priced on the basis of carcass merit • Premium prices are paid for hogs with more lean muscle and less fat • Trend toward improved genetics in breeding that results in the production of meatier hogs that meet consumer demand for leaner meat • Some hogs are still marketed on the basis of the weight of the animal without regard for carcass merit • This method of pricing is rapidly declining • Use of contracts with producers • More than 60% of hogs marketed are now sold under some form of contracting

14. Market Classes and Grades • The use (slaughter or feeder), sex, and grade of swine determines their classification • Slaughter swine • Those that are killed and sold as meat • Feeder swine • Those that are sold to be fed to higher weights before slaughter

15. The quality of the hogs and pigs is reflected in the grade standards established by the USDA • Grades of slaughter barrows and gilts are based on carcass quality and the yield of the four lean cuts • Ham • Loin • Picnic shoulder • Boston butt • The quality is referred to as acceptable or unacceptable • Acceptable • Have bellies that are at least slightly thick overall and not less than 0.6 inches thick at any point • Other quality factors • Amount and distribution of external finish • Firmness of fat and muscle

16. Five official USDA grade for slaughtered barrows and gilts are • U.S. No. 1 • U.S. No. 2 • U.S. No. 3 • U.S. No. 4 • U.S. Utility • Boars and stags are not graded

17. Feeder Pig Grades • Classified in the same grades as slaughter hogs, with the addition of one lower grade • U.S. Cull is the lowest grade of feeder pig • Feeder pig grades are used to indicate the expected grade of the pig when it reaches slaughter weight • Unthrifty pigs • either U.S. Utility or U.S. Cull grades • These pigs have failed to grow and gain properly • Poor care of disease can cause a pig to be unthrifty

18. Factors used to decide at what weight to market hogs • Type of Hog • Meaty hogs can be fed to heavier weights without a large increase in feed costs • The quality of the hog, as measured by the ratio of lean to fat, is not decreased appreciable with this type of hog • Can have a decrease in percent of lean cuts • Hog-Feed Ratio • As feed costs increase, the additional returns above feed costs decrease as hogs are fed to heavier weights • As the price of hogs increases, the returns above feed costs increases

19. Amount of discount for heavier hogs • Packers typically discount the price of hogs below 220-230 pounds and above 250-260 pounds • Time of year • The price of slaughter hogs changes seasonally based on the supply of pork and consumer demand for pork • Generally lowest in November and December • The supply of hogs coming to market is less variable than it used to be

20. Shrinkage of Hogs • Shrinkage • Loss of weight as they are shipped to market • The distance to market • A shrinkage of about 2% can be expected, regardless of how close to market the hogs are located • As distance hauled and time on the road increase, the amount of shrinkage increases • Rough handling • increases the amount of shrinkage • Temperatures below 20 F or above 60 F

21. Avoiding Shrinkage • Careful handling of hogs while sorting and loading reduces losses from shrinkage • It also reduces death losses and the number of damaged carcasses that arrive at market • Keeping the hogs warm in winter and cool in summer while hauling them • The wise hog producer reduces stress as much as possible when moving hogs

22. Activity • Worksheet

23. Quiz 1. It is often hard to evaluate different markets on the basis of price. True or False 2. Direct marketing accounts for the majority of hogs sold in the United States. True or False 3. U.S. Cull is the lowest grade of feeder pigs. True or False 4. Shrinkage decreases as hogs are moved greater distances to market. True or False 5. The U.S. Utility feeder pigs show unthriftiness because of disease or poor care. True or False 6. What percent of market hogs sold in the U.S. are priced on the basis of carcass meat merit? 7. Most auction markets have hog sale days ______. 8. The traditionally recommended weight for selling slaughter hogs has been ______. 9. A ______ is an older female hog that has farrowed or is showing signs of pregnancy. 10. List three methods that may be used to sell hogs.

24. Quiz- Key 1. It is often hard to evaluate different markets on the basis of price. ANS: T 2. Direct marketing accounts for the majority of hogs sold in the United States. ANS: T 3. U.S. Cull is the lowest grade of feeder pigs. ANS: T 4. Shrinkage decreases as hogs are moved greater distances to market. ANS: F 5. The U.S. Utility feeder pigs show unthriftiness because of disease or poor care. ANS: T 6. What percent of market hogs sold in the U.S. are priced on the basis of carcass meat merit? 70% 7. Most auction markets have hog sale days _once or twice a week_____. 8. The traditionally recommended weight for selling slaughter hogs has been __200–220 pounds____. 9. A _sow_____ is an older female hog that has farrowed or is showing signs of pregnancy. 10. List three methods that may be used to sell hogs. ANS: Direct marketing, terminal marketing, auction marketing