WEANLING PIG AND FEEDER PIG DIRECT PRICE REPORTS
Increased specialization in swine production has increased direct sales of weanling pigs and feeder pigs. Some of these direct sales are on the "spot market" where prices are negotiated at the time of sale. Other direct sales of pigs use "term pricing agreements" where are calculated from a formula based on market hog prices and/or some other market prices and other factors. (Examples of "term pricing agreements" were described in Swine News in October, 1995.) This article describes a few additional points about common terms of feeder pig prices.
"Spot market" prices for direct sales of feeder pigs can be obtained from a number of sources. The Market News service of USDA and cooperating state agencies have developed new weekly reports on Direct Feeder Pig prices. Dan Schussler in the Columbia, SC Market News office is the reporter for Southern and Eastern US Report. His telephone number is 803-737-4491. The USDA Direct Feeder Pig price reports for the South, for Iowa, and the eastern Cornbelt regions can be found on the internet at the NCDA Market News swine web page: http://www.agr.state.nc.us/markets/mktnews/swine.htm These reports contain prices for "Early Weaned Pigs" under 19 days of age and weighing 10 pounds or more. They also contain prices for feeder pigs in several weight categories: 40 pounds, 45, 50, 55, and 60 pounds. Early weaned pigs averaged $23.62 per head while 45 pound pigs averaged $44.23 per head in the May 1, 1998 Southern and Eastern U.S. Direct Pig report.
Most pigs reported are expected to produce market hog carcasses that yield 50% to 54% carcass lean. When available, prices for pigs expected to yield 46% to 50% are quoted separately. In the May 1, 1998 Iowa Direct Pig report, 50 pound pigs in lots of 250 head or less with 46% to 50% expected carcass lean sold for $38.72 per head while 50% to 54% pigs sold for $39.28 per head.
Within each weight category, separate prices are reported for lot sizes of 250 pigs or less, 250 to 750 pigs, and 750 pigs or more. In the May 1, 1998 Southern Direct Pig report, 50 pound pigs in lots of 250 head or less sold for $39.08 per head while lots of 250 to 750 head sold for $40.58 per head and lots greater than 750 sold for for $42.55. The effect of lot size is highly variable. In some cases, small lots sell for more than large lots.
Freight is another factor: pig prices in the Southern and Eastern region are quoted as "FOB at the seller's farm" while the prices quoted in the Iowa and Eastern Cornbelt reports are "Delivered at the buyer's farm." In the May 1, 1998 reports, large lots of lean 45 pound feeder pigs sold for $45.26 at the seller's farm in South and for $47.21 delivered to the buyer's farm in Iowa. Local supply and demand conditions also effect this regional difference in prices but freight is a major factor.
Footnotes on the reports indicate sliding values from the negotiated base weight. For example, one report states that "Most lots of 40-60 weight pigs have a sliding value from the negotiated weight basis which is calculated as the actual average weight of the lot plus or minus $0.30 to $0.40 per pound." If the farmers had agreed on a base price of $48 per head for 45 pound pigs and the pigs actually weighed 47 pounds, then the actual price paid may be $48.80 per head ($48 + (47 - 45) * $0.40).
Another "slide" reported in the footnotes states "Some lots of early weaned pigs are discounted $1.00 to $10.00 per head on pigs weighing under 10 pounds." The Iowa report states "Some early weaned lots have a slide of $1.00 to $1.25 per pound."
The weight "slides" for weanling pigs and feeder pigs can be thought of as the difference in value to the buyer of the additional weight. This value may include reduced days on feed required to reach market weight, reduced feed required to reach market weight, and possibly improved liveability of heavier pigs. Lightweight weanling pigs may be viewed as less likely to reach market weight or more likely to be culled at barbeque weight. Notice that although price paid per pig increases with average weight, the price paid per pound of feeder pig actually falls with increases in average weight. In the example above, the 45 pound pigs were valued at $1.067 per pound ($48/45 pounds) while the 47 pounds were valued at $1.038 per pound ($48.8/47 pounds).
Other features of the price reports include the Head Count in each category, the "Price per Head" in each category, and the "Weighted Average Price" in each category. The head count lists how many pigs were included in that category. Head count is important because a large number should produce a more reliable "Weighted Average Price" then a small head count. "Price per Head" lists the range of prices reported for each category. The range of prices reminds us that many additional factors affect negotiated prices. The "Weighted Average Price" indicates the average price paid for pigs in each category when the number of pigs sold at each price in the range is considered. While a few pigs sold at a very low price or a very high price may affect the range of prices reported, they will have less affect on the range of prices reported, they will have less affect on the "Weighted Average Price" than larger numbers of pigs sold at prices within the range.
In summary, many factors affect the sale price of a load of pigs sold directly from farmer to farmer. Several important characteristics of loads of pigs are reflected in the USDA Direct Sales Reports. Other factors such as expected market hog prices, feed prices, pig supply, availability of nursery and finishing space, and interest rates will cause the value of pigs to vary greatly through time.
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