National Pork Producers Council checkoff-funded research shows that 82.7% of U.S. hogs are sold on some type of marketing contract.
Glenn Grimes, University of Missouri agricultural economist, reported the findings at the 2001 National Pork Industry Forum.
"Non-spot or non-cash purchases in 2001 accounted for 82.7% of the purchases," Grimes reports.
In 2000, 74.3% of hogs were purchased on contracts. In 1997, 56.6% of hogs were non-spot market transactions.
Eleven packing companies were surveyed and asked to classify their purchases during January. The companies include Smithfield/Morrell, IBP, Swift, Cargill/Excel, Hormel/Rochelle, Farmland, Seaboard, Premium Standard/Lundy, Indiana Packers, Hatfield and Clougherty.
Federally inspected (FI) slaughter for Jan. 2-27 was 7,442,297 head. Companies surveyed included 86.9% of FI slaughter.
The survey shows that 17.3% of hogs were sold on the spot market, 54% were sold via a formula (a reported price plus some amount), 16% were sold on a fixed price tied to a feed price and 6% were sold on a fixed price tied to the futures market price. (To download Table 1, click here. This requires Adobe Acrobat Reader, free download.)
Several pricing options do not affect the variance of price received by producers, Grimes says.
"Only cash contracts, the one usually tied to futures and contracts without ledgers reduce producers’ price risk," he outlines. "These classes of agreements account for 16.7% of the hogs covered by this survey, up from 15.6% in 2000 and 9.9% in 1999."
Hog production owned by packers or companies with packing plants is estimated at 27%, up from 24% a year ago.
For more information, visit www.nppc.org.
Source: NPPC press release