How can you use data to drive your decision-making process? Big Stone Marketing, in collaboration with other PIPESTONE business units, would like to share two reports to help you get there: Precision Marketing & Marketing Report.
The precision marketing reports allow producers to more specifically control the impact of day to day marketing choices by providing guidelines for optimal live weight and sorting performance. The precision marketing reports do this by:
- Referencing each individual packer matrix
- Returning a Target Weight for each packer by calculating Margin Over Feed Cost (MOFC) using current (and nearby futures) hog and grain markets.
- Comparing each load of pigs to a top 20% sorter to determine opportunity for improvement.
- Publishing a Lost Opportunity Value to show each market load’s disadvantage (or advantage) compared to the top 20% performer.
Controlling weight variation and the average load weight can return considerable value to the producer. Weight variation, or standard deviation, should be managed to reduce sort deductions from the packer. If the correct load weight is achieved, keeping the variation of weight on the load close to the target is important to minimize loss of value. See figure to the right.
The table (at the top of the next page) is included as part of Big Stone Marketing’s Precision Marketing reporting on the website each week and gives a nice visual of the economic disadvantage created by being in the bottom 20% of sorters. It shows the target weight for each Packer (based on current market conditions) using three sorting categories: Best 20%, Ave Sorter and Bottom 20%. Note the disadvantage ranges from -$1.07/hd to -$1.76/hd for bottom 20% sorters. Conversely, a top 20% sorter gains up to $1.58/hd value depending on the packer. In this example, when delivering to Packer 2, an improvement from bottom 20% to top 20% results in $3.34/hd additional revenue.
Making improvement can only be accomplished with a disciplined approach by first, collecting information and second, (arguably most important) evaluating the information. Consistent marketing reports can help keep producers and their grower partners on track regarding marketing decisions. Understanding the value of these decisions is imperative to prioritizing changes in an operation.
Big Stone Marketing utilizes a unique tool to calculate lost opportunity/head. This tool is designed to maximize margin over feed cost based on the current market and feed environment.
The extract to the right represents a set of loads sold within 1 day of each other. Utilizing this sample, we can see the worst load (boxed in red) missed the target live weight by 25 lbs and had an average SD, resulting in a lost opportunity/head of $11.47. On the flip side, the best load (boxed in green) missed the target live weight just slightly and had a good SD, resulting in only a $0.46 lost opportunity/head. In the real world, I understand not every load can be perfect, but the goal is to keep your lost opportunity/head as low as possible to maximize margin over feed cost. NOTE: If you are a top 20% sorter, and hit the ideal target weight, your lost opportunity would be 0. But realize that if you beat the top 20%, you can actually have a negative opportunity, which is a good guy.
If your lost opportunity is consistently a bigger number (over $2/head), you are leaving marketing opportunity on the table.
Article By: Brian Stevens, President Big Stone Marketing & Angie Homann, Data Management Director