It takes as much effort to go broke in the hog business as it does to do it profitably. A solid marketing plan is the most critical decision you’ll ever make.
Remember the story of “The Three Little Pigs”? One built his house of straw, the other sticks, while the wise one made his of brick. The moral of the story is one of wisdom, making the right choices, and sustainability, not unlike that of hog marketing.
You can market/sell on a live basis, carcass basis, or a combination of both on a contract basis. Depending on the option you choose you could be looking at much as $3-4 cwt. difference in the outcome. The difference represents success or failure in the hog business.
It takes as much effort to go broke in the hog business as it does to do it profitably. We are taught to believe that hard work, sound animal husbandry practices and the best of breeding stock will assure us of a successful outcome. That’s what we learn when we go off to college. Most of us have never been taught a single course in livestock marketing. So, like the three little pigs, two out of three of us will fail because of making the wrong marketing decisions.
There are those that continue to do it as grandpa did — open the gate, run ‘em on the trailer, and off to sell ‘em to the highest bidder. This is the most fun way to do it, as it doesn’t require any sorting or decision making. It’s always fun when you get to go to town. There’s usually a free lunch, and if you’re lucky, a little recognition for topping the market.
Like the house built of straw, it’s just the route of least resistance.
The cost of doing business in a public market is prohibitive. There are commission charges, dealer profits, and shrink losses that can amount to as much as $10.00/head. A pretty big price to pay for a free lunch and the accolade of topping the market.
Fortunately, there aren’t many that do it this way anymore, but you hear of it every day, and you have to wonder why.
Most hogs today are sold on a carcass grade and weight basis. Thus, the importance of selection, weight sorting, and elimination of shrink loses. You get paid a “true value” for what you produce, not to be shared by middlemen, nor camoflauged prices inflicted by shrunk weights. This is the only real measure of value, and like that of the stick house, it’s a step in the right direction.
Like the house built of brick, the ultimate marketing option is that of selling on a contract basis. If you’ve done your homework and nailed down your cost of production, this gives you an opportunity to lock in a guaranteed profit. It eliminates all marketing costs, encompasses the beneﬁt of carcass grade and weight selling and allows you the fortitude to manage sound marketing principals rather than just a roll of the dice.
Once you have a sound solid “marketing plan” in place, all other management decisions can become focused on the goals and ambitions of your family business. You can sleep at night, greet your banker on Main Street, and find peace of mind that circumvents all understanding.
It’s the fog of walking around in the unknowing; not knowing if you’ll make it, the uncertainty of it all, and repercussion of failure that drive most businesses over the brink.
This is especially true of the hog business, as there are so many variables to consider — death loss, litter size, the rate of gain, feed efficiency, grade, cut-ability and the biggest one of all — what will the market be?
Take the market variable out of the equation, and everything else will fall into place. Proper management will neutralize the effect of those things for which you have control. And that for which you have the greatest power is market. So don’t leave it to chance, have a profit locked in before you invest your first dollar.
The two little pigs that built their house out of straw and sticks took a chance, one that didn’t work out. The wolf (like the banker) blew their houses down, but the house of the third little pig still stands straight and tall, just as yours will if you build it on a stable market foundation. A foundation that will withstand the winds of wolves and bankers alike.
Don’t take a shortcut when it comes to selling hogs. A marketing plan is the most critical decision you’ll ever make, so take the time to get educated about how to put a market plan together. Any knowledgeable associate will direct you to the right sources of information.
Believe it or not, those who you do business with want you to succeed. Their success depends upon your success.
But be cautious, there are blood-suckers out there that prey upon the mistakes of the uninformed. May the fable of the “Three Little Pigs” teach us that valuable lesson.