What Method Of Marketing Is Used When An Animal Is Sold To The Highest Bidder

Authors: Dennis DiPietre, University of Missouri; Ronald L. Plain, Academy of Missouri; Ted Schroeder, Kansas State University; Roderick C. Tubbs, University of Missouri

Reviewers: Gene and Teresa Cooper, LaCenter Kentucky; Palmer Holden, Iowa State University; Allan Lines, The Ohio State University

As the pork industry undergoes consolidation, the feeder pig production and marketing functions are experiencing tremendous change. Producers of feeder pigs are speedily declining while sales of feeder pigs have remained relatively constant indicating producers are getting larger. As consumers preferences change, packers in turn are signalling pork producers through their pricing systems that a high-quality, consistent and lean animal will receive significant premiums at the plant. This in plough places increasing pressures on feeder pig producers to amend quality, uniformity and overall wellness status of their output. Marketing high-quality, uniform and healthy feeder pigs in sufficient volume will be required of producers to be competitive as we enter the twenty-first century.

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Marketing methods will continue to change rapidly in the side by side several years. Interdependence and cooperative product and marketing associations will likely increment as producers answer to changing marketplace structures and requirements.

Guidelines for Choosing a Market

The following factors should be considered in selecting a market for feeder pigs The market or selling agency should:

1. recognize and reward quality, uniformity and health status
2. accurately assess (grade) quality
3. provide a means to accurately determine a fair, competitive price
4. provide an authentic, government-tested scale weight
5. provide timely and accurate accounting and guaranteed payment
6. provide a physical surroundings which preserves the quality of the pigs
7. provide a means to inspect, or receive authentic data about the pigs

Feeder Pig Marketing Techniques

Currently, methods of marketing feeder pigs vary past region. Techniques range from decentralized direct sales between individual feeder pig producers and finishers to more than centralized, sophisticated electronic markets. Each method offers unique circumstances and challenges for the feeder hog producer and/or heir-apparent. The virtually prevalent marketing methods include the following:

Direct feeder pig producer to feeder pig finisher. The producer may annunciate feeder pigs locally to attract interested buyers or the producer may develop long term supply relationships with one or more buyers. Price is more often than not negotiated and, in instances of longer term contractual arrangements, may be established using an agreed upon formula cost. These formulas frequently are based on a nearby or benchmark public cost. Determining a fair formula tin be difficult, particularly if the quality of the pigs being sold differs substantially from the average at the public markets. Many public markets no longer report prices. Both sellers and buyers need to exist informed of market atmospheric condition and have a means to determine the economic value of the pigs in order to settle upon a off-white price.

Public auction. A producer brings or consigns pigs to the livestock auction operated by a house or farmerowned marketing cooperative. Pigs may be sold as delivered or graded and pooled for auction to buyers. Pigs graded into compatible-graded lots are attractive to buyers. Pigs are sold to the highest applicant and price depends upon buyer demand. Generally, in one case pigs enter the sale ring they are sold without opportunity for withdrawal by the seller.

Electronic sale. Electronic auction selling has gained increased popularity in recent years with the opening of an electronic auction by Central Livestock Clan in St. Paul, Minnesota. Prospective feeder pig sellers' herds are health inspected and the seller is certified past the auction association. Feeder pigs offered for sale are scored based on health programs, feeding programs, and herd management. This information along with the identification of the seller is fabricated available to prospective buyers via reckoner modems. Consigned feeder pigs can exist reviewed by potential buyers who so participate in an open auction as each pen is offered for sale. No commingling or central collection of the feeder pigs occurs. Pigs move directly from the seller to the buyer. For a consignment fee sellers reserve the correct to withdraw pigs from the sale and declare a no sell. Likewise, feeder pigs that are not accurately represented or do not meet weight and grade specifications are either price adapted at delivery or may be rejected in extreme circumstances by the buyer. Credit checks are run on buyers to insure payment. This market potentially expands the number and geographic dispersion of both sellers and buyers relative to other market alternatives. Feeder pig producers considering this type of market should closely investigate the procedure and clauses for the detail market they are investigating. This marketing method offers potential benefits to both buyers and sellers if properly designed and operated.

Price, Demand, Supply Structure

Feeder pig prices are volatile, reacting to numerous economical factors. Figure 1 shows the monthly average price pattern of feeder pigs from 1985 through September 1992. In relatively brusque periods feeder pig prices vary from less than $xxx/head to more than than $60/caput. This cost variability confers considerable adventure to both feeder pig producers and buyers. The observed price fluctuations are a result of changes in demand for and/or supply of feeder pigs.

Figure 1 (tiptop) Monthly average St. Joseph, MO 40-50lb feeder grunter cost, 1985 to
September 1992. Effigy 2 (lesser) Factors affecting feeder hog prices.

Feeder pig supply is determined past sow farrowings and weaned litter size. The college the farrowings, all else constant, the more feeder pigs that will be available and the lower the feeder pig toll. Information on sow farrowing intentions and bodily sow farrowings are reported in the USDA quarterly Hogs and Pigs report. This study is released in March, June, September, and early January (December report). Once farrowings have occurred, feeder pig supplies are essentially determined and toll will be driven primarily by feeder grunter need factors.

Primary determinants of feeder squealer prices are shown in Figure 2. Feeder squealer demand is influenced by numerous factors. Turn a profit expectations of feeder pig buyers volition exist the major pricing factor. Expected market hog prices at the time the feeder pigs will be slaughtered are the most important consideration. The alive pig futures price for contracts maturing nearly the expected slaughter hog marketing date serve equally an expectation of futurity cash slaughter hog market price levels.

Thus, increases in deferred alive squealer futures prices generally betoken increased cash feeder hog prices. Any economic cistron that affects marketplace hog prices, including pork product, production of competing meats, meat exports and imports, consumer income, and strength of economy exert indirect influences on feeder pig prices.

Figure 3 (top) Monthly feeder pig prices in dollars per head: MFL Tel-O-Sale, 1982-91 averages. Figure 4 (lesser) Monthly feeder pig prices in dollars per hundredweight: MFL Tel-O-Auction, 1982-91 averages.

The 2nd near important cistron affecting feeder grunter demand and prices is feeding costs. Feeding costs are affected both by the price of the feed itself and the efficiency with which the animal tin can turn these inputs into saleable pork. Increases in feeding costs reduce feeder pig demand driving prices downwards. As a issue, weather condition affecting feed grain and soybean meal prices can have dramatic influences on feeder pig prices. Characteristics of the pig itself, such equally its genetics and wellness condition plus the environment within which the pig will be finished, also affect feeding costs and thereby feeder pig prices. Other costs of feeder sus scrofa finishing, including involvement rates, labor costs, routine health costs, energy costs, and building and equipment costs also affect feeder pig prices. I method to project the expected influence of changes in feed costs and expected slaughter hog prices on feeder pig prices is to develop feeder grunter finishing budgets to make up one's mind interruption-even feeder grunter purchase prices for different feeding costs and slaughter hog prices. Actual feeder pig prices normally follow break-even prices (mayhap with a profit adjustment).

Feeder pig markets also vary by region. Local weather, crop atmospheric condition, farm financial conditions, and slaughter hog market access should be monitored as they may impact local feeder hog prices. Figures three through 7 graphically illustrate information about feeder squealer prices.

Sources of cost information. Daily feeder sus scrofa cost information is limited in many regions. Producers often must rely on weekly auction quotations, terminal market place sale reports, cooperative marketplace reports, releases from agribusiness firms, electronic wire service reports, and periodic government releases. The percentage of feeder pigs being marketed direct from feeder pig producer to hog finisher in private treaties reduces the availability and, therefore, representativeness of feeder pig toll data. Feeder pig prices normally are quoted on a per caput basis or occasionally on per hundredweight (cwt) basis. Interpretation of price reports requires understanding the market place atmospheric condition, location, terms of the auction, class standards, number of pigs represented by price quote, feeder pig quality, and preconditioning and vaccination backgrounds of the pigs.

Effigy v (height) Price ratio: feeder pigs to market hogs, 1982-91 monthly averages. Figure 6 (lesser) Monthly feeder grunter and market grunter prices, 1982-91 monthly averages.

The USDA publication Livestock, Meat, Wool Market News contains price quotes from a number of feeder pig markets effectually the country. Subscription data for this weekly publication can exist obtained from USDA Livestock & Grain Market News, Room 2623-S, P.O. Box 96456, Washington, D.C. 20090-6456.

Formula pricing. As an alternative to using a competitive bid, some feeder pig producers use a formula to establish the sale cost for their pigs. Making a formula pricing system work is very hard. Because of irresolute price relationships amongst slaughter hogs, squealer futures, feed prices, interest rates and other production costs, formula prices will rarely exactly match market prices. When the formula toll is below the market place price, the pig seller oftentimes feels shortchanged. When the formula price is above the market place, the pig buyer is likely to feel disadvantaged. For this reason, formula pricing works all-time when the feeder pig producer deals with the same buyer(south) over an extended period. The most successful formulas are those based on an established feeder squealer market place. Some suggested price formulas for feeder pigs:

• Formula one: The cost per head = $two under the top price for comparable weight feeder pigs at a designated market
• Formula 2: The price per cwt = $three over the boilerplate cost for comparable weight pigs at a designated market
• Formula 3: The price per head for a 45 pound squealer = 2 times hog/corn ratio
• Formula 4: The price per head for a twoscore pound pig = market hog price/cwt minus the cost of 4 bushels of corn
• Formula 5: The price per cwt for a 45 pound pig = 2 times the live hog futures toll for hogs minus $4.
• Formula 6: The price per cwt = market place grunter price times the ii factors (one for pig weight and 1 for flavor) from the table at right:

Factors to go on in mind when considering pricing formulas are:

• Feeder sus scrofa prices are highly variable and fluctuate more from sus scrofa to squealer and location to location than exercise market place hog prices.
• Price formulas are only general toll indicators and work best when hog and feed prices are in normal ranges.
• Cost formulas work all-time on average pigs. About formulas make no adjustment for location, pig quality or lot size.
• Price formulas work well on boilerplate. At any signal in time, at that place may be considerable divergence between the market place price and the formula toll.

Pig Wt	Factor	Grunter Wt	Factor
40lb	2.04	70lb	1.56
45lb	1.96	75lb	ane.49
50lb	1.87	80lb	i.43
55lb	i.79	85lb	1.38
60lb	1.71	90lb	ane.31
65lb	i.64	95lb	i.24
Calendar month	Factor	Month	Cistron
Jan	0.99	Jul	0.82
Feb	1.12	Aug	0.87
Mar	one.30	Sep	0.95
Apr	1.23	Oct	0.96
May	1.05	November	0.97
Jun	0.88	Dec	0.91

Guidelines for Selling Feeder Pigs

Selling to an individual buyer. Historically, nigh feeder hog producers have been able to rely upon organized public markets equally an option for selling some or all of their pigs. For a diverseness of reasons, the number of organized feeder pig auctions has declined greatly in the terminal decade and is probable to proceed to dwindle. This means that direct sales to finishers may exist the simply selection available to many feeder pig producers in the future. Directly sales place importance upon lot size, sus scrofa uniformity, genetics and health condition. It is clear that feeder pig buyers place a significant premium upon large lots of uniform pigs from a single producer. Selling feeder pigs to an individual heir-apparent allows the seller to work with the heir-apparent to refine and customize a health programme to a buyer'due south needs. The seller should piece of work with the buyer and the buyer's veterinary to insure that the health condition of the pigs delivered meets the demands of the buyer.

Full general Guidelines

1. Provide healthy pigs of uniform size and quality. Remove the "bottom-sort" or "tail-enders" from the group. All-in, all-out nursery production is critical to overall illness control and helps with uniformity of pigs.
2. Provide pigs with a narrow age spread (2 weeks or less). This helps reduce the transmission of disease organisms, especially respiratory diseases, from older to younger pigs.
3. Pigs' tails should be docked and male pigs castrated well in advance of delivery, so that they are healed by the time the heir-apparent receives them. Pigs with physical defects, such equally hernias or other blemishes, should not be delivered.
4. Parasite control practices should exist established in the seller's breeding herd to insure the delivery of pigs free of internal and external parasites.
5. The parent herd should accept no history of Actinobacillus pleuropneumonia (APP) or swine dysentery. Pigs should ideally be free of pseudorabies (PRV), or status should be known. Some finishers do not discriminate severely against PRV positive pigs if they are free of other diseases. State laws vary on motility of PRV infected pigs.
6. Pigs should be vaccinated for erysipelas. If the parent herd has a history, or if the buyer requests, atrophic rhinitis and APP vaccines may be necessary.
7. The seller should be willing to supply herd history and background information to the buyer and the buyer's veterinary. A health certificate or inspection form should be supplied by the seller'southward veterinarian.

Figure vii. Feeder hog and marketplace hog seasonal prices, 1982-91 monthly averages.

Selling to a market. Virtually of the guidelines that use to selling to an individual buyer utilise to selling to a public market place, except that usually the advice between seller and heir-apparent is non practical, so a specific program cannot exist developed. Most markets accept general health requirements apropos weight range and physical appearance of pigs. Uniformity of pigs is still recommended merely non disquisitional since they will unremarkably be sorted by weight and class by market personnel. Most markets now crave that pigs be from PRV-monitored herds earlier they will accept them for sale.

Implications of Modified Medicated Early Weaning and Isowean® Engineering

Traditionally, feeder pigs have been sold, mixed, and transported at near 40 pounds of torso weight or effectually 8 weeks of age. Mixing pigs at 3 weeks of age or less is superior from a health standpoint than mixing pigs subsequently. Removing pigs from the parent herd at 3 weeks of age or less removes them from the principal source of exposure to infectious organisms (the sow herd) while they still have maternal antibodies (passive immunity) to protect them from many disease organisms. Research is underway to determine the specific logistics of transporting and housing immature pigs that originate from several source herds. A heated, covered method of transportation and a modern, environmentally-controlled hot plant nursery are necessary. This engineering science may allow buyers to acquire pigs from more than one source without the severe affliction consequences that sometimes occur when mixing 40lb pigs.

Co-op Feeder Squealer Production/Marketing

Every bit the pork production industry evolves, pressures for volume product of consistent, high quality pigs are resulting in the reemergence of cooperative feeder squealer production. Ordinarily managed, several producers pool their resources to develop a feeder sus scrofa production site. Each producer may and then claim one week's (or some fraction of a week'southward) production on a rotating footing with excess pigs (if bachelor) contractually sold to third parties. Ofttimes a different site is obtained for the sow herd and nursery to take reward of multiple site wellness benefits. Pigs may be formula priced to cooperative participants based on price. Such an arrangement allows specialization, consistency and the exploitation of economies of size. This tendency is expected to increase in the hereafter.

Grade

USDA grading standards are available for feeder pig producers. Class description can provide the uniform terminology for trading nationwide, using new communication engineering science and for accurate formula pricing. Some organizations alter the USDA standards to conform with their own grading systems. All grading standards attempt to chronicle the feeder pig to the last, finished quality of the animal. USDA grades include U.S. Numbers 1 through 4 and Utility. Additional information about USDA grades can be obtained from the Packers and Stockyards division of USDA or your local Cooperative Extension Office.

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Source: https://porkgateway.org/resource/feeder-pig-marketing-techniques/

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