An analysis of marketing costs incurred, methods used, and prices received by producers utilizing Tennessee organized feeder pig sales

The primary objective of this study was to evaluate the marketing practices and costs incurred by producers selling feeder pigs through Tennessee organized sales.

Data were obtained from 15 organized feeder pig sales in Tennessee during the summer of 1976. Producers were personally interviewed at every sales location. The total sample consisted of 274 feeder pig producers.

Marketing costs consisted of transportation and labor expense, costs due to bruising and crippling, and the selling charge at the market. Producers travelled an average of 24.4 miles to market their pigs. The average time spent was 2.5 hours. The average marketing cost per head was $0.69.

Only 17 percent of the producers used any form of pricing or marketing information. Eighty-eight percent of the producers marketed at the location nearest their farm and only 7 percent marketed at specific times of the year.

A secondary objective of this study was to utilize an econometric model employing theoretically relevant variables to analyze price variations in and among 13 selected Tennessee feeder pig sales locations. Two equations were specified—one to show the impact of expected prices of hogs and corn on feeder pig prices and another to show the effects of cross sectional variables on geographic price differentials.

Data were obtained from the U.T. Extension Service and U.S.D.A.'s "Livestock Market News." Least squares regression was used to estimate the coefficients of the two equations.

The expected prices of hogs and com were shown in the first equation to have positive and negative influences, respectively, on feeder pig prices. Dummy variables were incorporated into this equation to estimate the price differences due to location and month of sale.

It was shown in a second equation that three cross section variables—average quality, average weight, and average number of head per sale--accounted for a large proportion (91 percent) of the price differentials among market locations. The fact that the residuals in this equation were fairly small shows that none of the markets studied had any unusual advantages or disadvantages not accounted for by the three variables utilized.