Direct marketing of early weaned pigs and market hogs has created some major changes in the nation's hog market reports. USDA's Agricultural Marketing Service (AMS) is trying to keep up in their daily hog reports.
"When hogs were primarily traded at terminal stockyards, price information was very free flowing," notes Phil McFall, USDA livestock market news reporter from St. Joseph, MO. "It was very easy to come by because all the hogs were there. We could witness the sales. We had good price information to pass back to our customers."
But the switch to lean value programs and direct sales to packers along with farm-to-farm feeder pig sales has changed that.
"It gets very hard to know what an individual set of hogs brought or what somebody actually got for their hogs," McFall adds.
AMS' Livestock Market News was created decades ago to make sure livestock producers had access to accurate price information that reflected the day's market. This enables producers to make informed decisions for their business.
Fully aware of their responsibilities, the Livestock Market News groups are trying different methods to obtain price information on slaughter hogs, early weaned pigs and feeder pigs. Now, livestock reporters call direct to packers, dealers and producers to learn hog prices, reports Jack Obermeier with USDA's Federal-State Livestock Market News in Des Moines, IA.
Most of the market hog information is given on a carcass basis. A matrix is used to convert carcass information to a live hog basis. The prices are for a 47-49% lean animal. Obermeier stresses the prices reported are a base price only with no premiums. The average market hog today is at least 51% lean.
Newest in the department's price collection methods are toll-free phone lines available for pork producers to report their own hog sales.
The department has launched new feeder pig reports. Reporters call both buyers and sellers in addition to pig brokers for the information.
Fewer Hogs Set Prices While the Livestock Market News seeks new solutions, they know they face many bumps in the road ahead. One bump - the number of market hogs not sold on a packer contract continues to decline. Obermeier says this means fewer hogs actually set the daily price.
"Fifty to sixty percent of the hogs that packers buy are on contracts, formulas, etc.," he says. "The rest of the pigs are bought on spot markets. Spot markets set the hog price for the rest. The spot markets are the prices packers will have to pay to get their (packing house) fill above what's been contracted."
Obermeier believes the spot markets will continue to decline the next five years. This means an even smaller number of hogs will determine hog prices.
Then the market will move to one based more on meat sales. Obermeier says this is not healthy for the industry. "I can't understand wanting price driven by one market," he says. "We need both livestock and meat prices."
Without prices based on livestock, Obermeier says outside factors like the weather and availability of livestock will be lost. "The whole price system is changing," he adds. "Pork producers have to get involved."
Steve Meyer, economist with the National Pork Producers Council (NPPC), disagrees. "A live bid today is based off what packers think the meat will be worth and the availability of hogs," he says. "Most of the hogs are sold as a carcass today, anyway. A lot of producers don't realize that because they are quoted a live price."
Instead, Meyer believes a smaller spot market can accurately reflect hog price. "There is no blanket answer of how many hogs is too few (to reflect the market)," he says. He believes that eventually the industry will reach a balance between contract and non-contract. He does not think the contract numbers will go to 100% of the industry.
"Every 3-5 years, producers are going to make a decision to sign a contract," Meyer explains. "If they think the market is too thin to fairly price those hogs on a formula basis, they're not going to sign the contract. By default, that will put more hogs on the market.
"There is concern, but no definite answer to the problem," he says. "As long as we have good information being traded and some good reporting done, I don't think we have a big problem."
Producers' Toll-Free Line Getting more participation from producers on price reporting will help ensure an accurate hog market, both Meyer and Obermeier maintain.
The new toll-free phone lines should help. A two-year test with a toll-free phone line in Missouri has shown it can work, according to McFall.
"It was slow getting off the ground because we had to establish ourselves with a number of producers," he admits.
At first, they had days with no hogs reported. Now, the phone line obtains prices on roughly 2,000 hogs/day. This compares to about 8,000 head/day on the regular Missouri market report.
When producers sign on for participation, they are given a personal identification number (PIN). From then on, only the PIN number is used. Nobody has access to this information, except for use on the reports.
When producers sell loads of hogs, they need to call in on the line as soon as possible with the number sold, price, and other pertinent information, McFall explains. This allows them to keep up-to-the-minute reports. During the work day, the line is manned by a Missouri reporter. So the producers can also obtain information about the market from the reporter.
Producers participating in the service must be willing to supply a kill sheet if requested by the Livestock Market News reporter. Packers are required to provide records, too, when requested. This way the reporters can spot check reports to make sure the information is accurate. McFall says some producers mail in all their kill sheets anyway.
The idea for the toll-free number was originally devised by representatives of NPPC, USDA, the Missouri Pork Producers Association, Missouri Department of Agriculture and the University of Missouri. "We wanted to come up with some way to get better, more current information and exactly what the farmer received for his hogs," McFall says. "This is a product of everybody pulling together to get it off the ground."
Now Iowa is nearly ready to launch an 800-phone line for a market report. Bruce Thomas, another livestock reporter in the Des Moines USDA Livestock and Grain Market News office, will take calls on the line. Illinois and Wisconsin also are looking to begin an 800-phone line.
Feeder Pig Reports Last November, the first edition of a new feeder pig report was issued by the Iowa Livestock Market News office in Des Moines. It is a cooperative effort between state and federal offices. Thomas handles the report.
The new feeder pig report was designed to catch the early weaned pigs that are sold direct, farm to farm. Thomas calls major pig buyers and sellers along with pig brokers. In the past, feeder pig prices were gathered from the many feeder pig auctions that used to operate throughout the Midwest.
After several months of the new report, SEW pigs account for one-third of the hogs on the weekly report. SEW pigs are 19 days or younger. Direct feeder pig sales account for the rest.
For the first week in April, the report included 51,000 pigs delivered in the Iowa, Illinois, southern Minnesota, Wisconsin, eastern Nebraska and eastern South Dakota region. Early weaned pigs accounted for 16,000 pigs. The prices are quoted on a delivered-to-the-buyer basis. Most producers requested this type of report for this area.
Another national feeder pig report is issued from the South Carolina livestock market news office in Columbia. Pig numbers ran about 20,000 head during the first week of April. More than 8,000 head were early weaned pigs.
This report issues weekly prices on a "picked-up" basis at the sellers farms in North Carolina, South Carolina, Georgia, Tennessee, Kentucky, Alabama, Mississippi, Arkansas, Missouri, Texas, Oklahoma, western Kansas, Indiana, Ohio and Michigan. Here, most of the pigs are sold, therefore, the difference in price quotes on a picked-up basis.
Illinois now offers its own state feeder pigs report on a "picked-up" at sellers farm basis. Thomas says Missouri also plans to start a feeder pig report, too.
Pork producers are needed to get the new producer-driven market report going in Iowa and Minnesota. Producers interested in signing up for the new reporting can call: (800) 687-7410. A similar line in Missouri is: (800)328-1165.
Anyone with any questions about the new reporting system, reports or even the new feeder pig reports may call in on the line, too. The new phone number is an incoming wats line. Individual producer price information will remain confidential.
All USDA Livestock Market News reports are readily available to producers. DTN/ FarmDayta run markets continuously. Also, producers can log onto the Internet site at www.ams.usda.gov/lsg/mncs/index.htm