For the target-weight scenario, net present value is maximized when the target weight
reaches about 270 pounds, holding other variables constant (figure 3). Also, model
simulation suggests that if producers grow genetically improved feeder pigs and
if the purchase premium is appropriate, NPV improves to a value between $6,000
and $8,400. For example, this happens with a 0.1-pound increase in ADG and a
premium of $1.00 per head for 260 pounds to 280 pounds target-weight scenarios.
The pricing matrix we used penalizes a pig heavier than 280 pounds. The
model indicates that targeting about 270 pounds market weight is optimal and
producing pigs heavier than 280 pounds is not advised; thus, our model closely
emulates the current market situation. The pricing matrix signals producers to
decrease the proportion of pigs heavier than 280 pounds. Our model advises a
compliant target weight. Thus, independent finishers have incentive to market
pigs just past the midpoint of the “sweet zone” of the pricing matrix (the range
of weights where pigs are not penalized for being too light or too heavy).
For allied farmers with a fixed shipment schedule, it is also more profitable to
ship heavier pigs than the 1995 to 1998 average. Extending all shipping schedules
by an additional eight days (a longer production period results in heavier pigs
shipped) maximizes NPV (figure 4). In this case, pigs will be on feed for 120,131,