The number of hogs being sold by a negotiated price is diminishing, and that was termed “worrisome” by University of Missouri livestock economist Ron Plain.
Negotiated pricing has continued to decline and is now down to less than 5% of hogs, Plain reports in a recent analysis. When his former colleague Glenn Grimes began the survey of market hog sales practices in 2002, 13.8% of hogs were sold with negotiated pricing. That figure stabilized at 10.4% in 2004 and 2005, but continued to drop, and is now at 4.9% for 2010.
And as the number of negotiated sales has declined, the number of packer-owned hogs being sold has increased. That number was 16.4% in 2002 and has climbed to 25.2% in 2010, while all other means of selling hogs have all remained fairly steady, according to blogger Stu Ellis in www.farmgateblog.com .
Despite the downward trend in negotiated pricing, that number is used to identify trends at other sale points.
Plain explains, “The widely reported negotiated hog price is a key component in determining the price for four of the other marketing categories. The price paid for the 4.9% of barrows and gilts purchased on a negotiated carcass weight basis in 2010 was crucial to determining the price for roughly three-fourths of the combined 64.3% of hogs purchased on Market Formula, Other Market Formula, Other Purchase Agreement and Packer Sold.”
Plain says it is unclear how much longer negotiated pricing will be used to “effectively represent the true supply and demand for hogs and be a sound basis for formula pricing other hogs.”
If negotiated pricing becomes too small of a factor to effectively determine the value of pork, Plain says the Mandatory Price Reporting Act of 2010 requires packers to report prices and volumes of wholesale pork cuts, and he thinks that will become a more widely adopted measure of pork value.
Mandatory Price Reporting also identifies weights and percent lean. The highest scores were for those hogs purchased on a contract with the CME lean hogs futures contract at more than 55% lean.Ellis formerly was with the University of Illinois Extension.