Pork Producers Urged to Discover, Report Prices

October 25, 1999

Pork producers are being urged to negotiate sale prices with several packers and report the resulting price offers to USDA's Agricultural Marketing Service's Livestock Market News. A negotiated price is defined as a cash or spot market sale price determined by an interaction and agreement between a seller and buyer on a given day.

The National Pork Producers Council Board of Directors is encouraging the practice to strengthen producers' position in the market. A producer price discovery task force made the recommendation to the NPPC board.

"Such actions by producers would at least partially offset the effect of high percentages of contracted supplies," said NPPC President John McNutt. "More negotiated sales would help ensure the prices reported for the spot market reflect the current value of hogs."

A University of Missouri checkoff-funded study conducted earlier this year found that for all hogs slaughtered in January, 64.2% were sold under some type of prearranged marketing arrangement and 35.8% of all market hogs sold were sold on the spot (cash) market. The largest share of all contracted hogs, 44.2%, were sold using a formula price contract, according to Glen Grimes, University of Missouri livestock economist. A formula price contract sets a sale price according to some reported price and a formula established by a previous agreement between a producer and a packer.

"Pork producers believe that to be able to make knowledge-based business decisions for the future, they must have a transparent, accurate and timely livestock market reporting system," says McNutt. "This is another step in creating meaningful market transparency in the livestock marketplace."