Hog Price and Volume Comparisons across Alternative Sale Types, Emphasis on COVID-19 Disruptions

Ezra Butcher, Lee L. Schulz
September 2021  [21-PB 36]

Download Full Text

Suggested citation:

Butcher, E. and L.L. Schulz. 2021. "Hog Price and Volume Comparisons across Alternative Sale Types, Emphasis on COVID-19 Disruptions." Policy brief 21-PB 36. Center for Agricultural and Rural Development, Iowa State University.

Executive Summary

In 2020, due to COVID-19, swine and pork markets in the United States experienced the worst disruption since 1998. We seek to inform discussions about marketing outcomes and possible structural changes by establishing performance baselines and providing definitions and descriptions for transactions between producers and packers. From 2010–2020, prices were highest in 2014 and lowest in 2020. We estimate simple models to see how changes in pork packing plant capacity utilization impact market hog prices by sale type. Results indicate that negotiated prices are the most sensitive to increases in utilization, decreasing 2.34% for every 1% increase in utilization. Negotiated sales volume has become incredibly thin, comprising only 1.52% of all hogs reported in 2020, compared with 14.65% back in 2002. There is a need, on occasion, to modify how data is published which directly contributes to the effectiveness of Livestock Mandatory Reporting (LMR). For example, other purchase arrangement sales increased in volume in 2016 as hogs raised without ractopamine or antibiotics were reclassified from swine or pork market formula sales. Sales based on the CME Lean Hog Index or Pork Cutout Index have been reclassified as swine or pork market formula sales. The correlation of pork carcass cutout values and negotiated hog prices has deteriorated from 0.919 in 2013 to 0.255 in 2020. Separating swine or pork market formula sales into swine formula sales and pork formula sales could improve price correlations. Summaries of price distributions provide a snapshot of marketing outcomes and aid in bringing further transparency to the marketplace.