This morning I’m working on my presentation for this Thursday at the Minnesota Pork Congress. The topic they asked to me to present is “Benchmarking Data”.
When we think of benchmarking data, we often think of large data sets from cooperating producers where all of the data is compiled in a similar manner. When the Iowa State and University of Nebraska Swine Enterprise Records programs were in existence these served as an industry reference point for a variety of production and cost of production values.
Today there are very few recording schemes that make production data available, and even fewer that have cost of production data. On the production side www.metafarms.com has begun releasing data compilations for wean-finish performance. On the reproduction side we’ve got data showing up from www.metafarms.com, www.pigchamp.com and www.swinems.com in the popular press.
For the past 2 years, any cost of production data was viewed with caution as rapidly and frequently changing feed ingredient prices have made a shambles of any comparisons. Feed cost per unit of gain was driven as much by the timing of feed grain purchases as it was by production practices. The largest publicly available data set on cost of production is the University of Minnesota Farm Business Association data at www.finbin.umn.edu.
As I worked on various cost of production standards it quickly became evident that we are measuring and recording the wrong numbers. Over 95% of all pig’s are now priced based on carcass weight with at least one major slaughter plant not even capturing liveweight at delivery. Yet as an industry we use liveweight in our denominator for all of our performance and cost of performance variables.
For example, we talk about feed cost per unit of liveweight gain, liveweight daily gain, etc. The only time liveweight is really important in production is when someone is in a pen of pigs marking the appropriate pigs for shipment to slaughter. At that point in time liveweight is the only criteria available for this judgment call. In a small number of US production facilities sorting scales are used to identify animals for sale to slaughter based on liveweight.
The relationship between liveweight and carcass weight is yield and this can vary from 73% to 78% depending on the packer, time off of feed and water, diet, etc. The Chicago Mercantile Exchange lean hog contract is based on an assumption of 75% average yield.
Because almost 100% of our pricing at slaughter is based on carcass weight, shouldn’t our production variables of interest be reported based on carcass weight without having to do the adjustment for yield? If the expectation is a net price of $83/cwt hot carcass weight at slaughter, wouldn’t we be better off knowing that our feed cost and total cost per unit of carcass weight than per unit of liveweight?
I recognize a lot of the difficulties in getting to this point but something to think about as you pull your production and cost numbers together this tax season.