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Analysis of USDA Mandatory Hog Price Data 2002-2006

by 5m Editor
8 November 2007, at 12:00am

By Glenn Grimes, Professor Emeritus, University of Missouri & Ron Plain, Professor, Agricultural Economics Department, University of Missouri

The USDA Mandatory Price Reporting System's price data reports started in 2001 as part of the Livestock Reporting Act of 1999. This analysis summarizes reports for 2002, 2003, 2004, 2005, and 2006.

Each weekday USDA releases three reports on negotiated hog prices which are named after their release times. The first report, called the Morning Report, covers hogs purchased by packers between midnight and 9:30 a.m. The second report, called the Afternoon Report, covers hogs purchased between midnight and 1:30 p.m. The third report, called the Prior Day Report, covers hogs purchased by packers between midnight and midnight. The morning and afternoon reports classify hogs by state of origin while the prior day report classifies hogs by slaughter plant location. These carcass price reports cover about 70% of the federally inspected barrow and gilt slaughter. Market hogs raised and slaughtered by a packer, those sold on a live weight basis, and those sold to small packers are not covered by these price reports.

Table 1 shows the average quarterly negotiated price from the Morning Report for the last five years for USDA's four hog price reporting regions: Eastern Corn Belt, Iowa-Minnesota, Western Corn Belt (which includes Iowa-Minnesota hogs) and National. Table 2 reports the average negotiated afternoon prices and Table 3 gives the prior day negotiated purchase price averages since 2002. All prices are dollars per hundred pounds of carcass weight.

Table 4 shows the comparison of afternoon and morning weighted average prices for negotiated hogs in the four geographic areas covered by USDA's Mandatory Price Reporting System Reports. Note that the afternoon minus the morning price differences were positive, with only a few small exceptions. These positive differences existed in quarters when prices were trending downward as well as quarters with uptrending prices. Over the years 2002-2006, the average afternoon price has been roughly 28 cents higher than the morning average. We believe that the best explanation for the positive difference is that many marketing contracts are currently priced off the Morning Reports, thus creating an incentive for packers to delay aggressive bidding until after the Morning Report data have been submitted to USDA. Afternoon prices are then bid higher.

Table 5 shows the differences between weighted average prices for negotiated hogs on USDA's Prior Day Report (issued at 8:00 a.m. and covering all of the animals purchased the previous day) and the Afternoon Report of that prior day. For the last five years, the Prior Day Report price for the Western Cornbelt averaged 17 cents higher than the afternoon price in the Western Cornbelt. The difference in the Eastern Cornbelt was only 6 cents, and in Iowa-Minnesota the difference averaged only 1 cent.

The 2006 Prior Day Purchased price for Iowa-Minnesota was surprisingly 12 cents lower than was the 2006 Iowa-Minnesota afternoon price. We are not sure why. This report analyzes the prices of negotiated sales of barrows and gilts priced on a carcass weight basis and sold to packers covered by the Livestock Mandatory Reporting Act. Hogs sold by producers to packers and by packers to other packers are included in this summary. The number of packer-sold hogs increased significantly in 2006. This increase in the number of packer-sold hogs may bring about a shift in some of these price relationships based on the time of day packers choose to negotiate their hog sales.

Theoretically, the Prior Day Report prices should be the most stable and hardest to manipulate of all the prices published under Mandatory Price Reporting since it represents all of the hogs purchased on a given day.

Table 6 and Table 7 compare the afternoon prices and the Prior Day Report prices for the Eastern Corn Belt, Western Corn Belt, and the Nation to the Iowa-Minnesota price. Over 2002-2006 period, the Iowa-Minnesota afternoon price averaged 71 cents higher than the Eastern Cornbelt, 35 cents higher than the National average, and 13 cents higher than the Western Corn Belt. A similar relationship exists for the prior day prices (Table 7). These data demonstrate the expected situation of frequently higher prices in the Western Corn Belt and in Iowa-Minnesota where there are more packing plants and some hog-deficit areas.

In general, these data indicate that hog prices tend to move higher from early morning to late afternoon. Thus, pork producers should be better off using the Afternoon or Prior Day Reports from USDA's Agricultural Marketing Service to set their base price for marketing contracts. Not only do these prices tend to be higher, but their inclusion of a larger number of hogs and longer time periods will make price manipulation more difficult. Producers should avoid using the Eastern Corn Belt price as a base for packer contracts. The Iowa-Minnesota and Western Corn Belt prices have been very comparable and marginally higher than the National price.

Table 1: Negotiated Barrow and Gilt Prices
Morning Prices

($ per cwt., including packer sold)
Period Iowa-Minn Eastern Corn Belt Western Corn Belt Nation
2002 First Quarter 50.92 50.26 50.84 50.61
Second Quarter 45.42 44.66 45.32 45.08
Third Quarter 44.20 42.22 44.12 43.45
Fourth Quarter 39.97 39.51 40.00 39.82
Annual Average 45.10 44.14 45.05 44.72
2003 First Quarter 45.73 45.28 45.75 45.64
Second Quarter 55.99 55.68 55.93 55.84
Third Quarter 55.76 56.49 55.78 56.11
Fourth Quarter 47.99 47.65 48.02 47.87
Annual Average 51.39 51.30 51.39 51.39
2004 First Quarter 58.52 58.77 58.44 58.60
Second Quarter 72.14 72.75 72.16 72.48
Third Quarter 75.13 74.11 75.00 74.58
Fourth Quarter 72.17 70.09 72.08 71.18
Annual Average 69.48 68.93 69.41 69.20
2005 First Quarter 69.74 67.24 69.59 68.62
Second Quarter 69.83 68.53 69.66 69.19
Third Quarter 67.21 66.68 67.10 66.88
Fourth Quarter 60.26 59.79 60.15 59.98
Annual Average 66.77 65.57 66.64 66.18
2006 First Quarter 56.16 56.28 56.08 56.14
Second Quarter 65.26 64.07 65.07 64.59
Third Quarter 68.33 67.07 68.15 67.58
Fourth Quarter 60.72 60.07 60.56 60.26
Annual Average 62.60 61.86 62.45 62.13
2002-2006 Average 59.06 58.35 58.98 58.72


Table 2: Negotiated Barrow and Gilt Prices
Afternoon Prices

($ per cwt., including packer sold)
Period Iowa-Minn Eastern Corn Belt Western Corn Belt Nation
2002 First Quarter 50.97 50.48 50.99 50.78
Second Quarter 45.62 45.02 45.65 45.40
Third Quarter 44.44 42.59 44.42 43.69
Fourth Quarter 40.23 40.29 40.31 40.33
Annual Average 45.30 44.57 45.32 45.03
2003 First Quarter 46.13 46.14 46.18 46.17
Second Quarter 56.46 55.94 56.34 56.22
Third Quarter 56.31 56.40 56.21 56.24
Fourth Quarter 48.53 47.63 48.49 48.11
Annual Average 51.84 51.55 51.79 51.71
2004 First Quarter 58.88 59.01 58.67 58.82
Second Quarter 72.81 73.16 72.59 72.82
Third Quarter 75.52 74.36 75.35 75.01
Fourth Quarter 72.38 70.36 72.20 71.52
Annual Average 69.89 69.22 69.69 69.54
2005 First Quarter 69.74 67.84 69.53 68.97
Second Quarter 69.96 68.59 69.76 69.40
Third Quarter 67.61 66.89 67.38 67.21
Fourth Quarter 60.24 59.75 60.14 60.01
Annual Average 66.90 65.78 66.72 66.41
2006 First Quarter 56.38 56.25 56.24 56.22
Second Quarter 65.48 64.44 65.23 64.90
Third Quarter 68.33 67.41 68.07 67.76
Fourth Quarter 61.08 60.42 60.79 60.60
Annual Average 62.80 62.12 62.57 62.36
2002-2006 Average 59.35 58.64 59.22 59.00


Table 3: Negotiated Barrow and Gilt Prices
Prior Day Purchase Price

($ per cwt., including packer sold)
Period Iowa-Minn Eastern Corn Belt Western Corn Belt Nation
2002 First Quarter 50.87 50.57 50.84 50.74
Second Quarter 45.58 45.09 45.62 45.40
Third Quarter 44.51 42.53 44.59 43.75
Fourth Quarter 40.32 40.27 40.40 40.36
Annual Average 45.30 44.59 45.34 45.04
2003 First Quarter 46.20 46.11 46.28 46.22
Second Quarter 56.49 55.82 56.57 56.36
Third Quarter 55.95 56.45 56.10 56.20
Fourth Quarter 48.67 47.69 48.76 48.40
Annual Average 51.85 51.54 51.95 51.82
2004 First Quarter 58.85 59.06 58.88 58.97
Second Quarter 72.88 73.29 72.80 72.98
Third Quarter 75.81 74.48 75.75 75.39
Fourth Quarter 72.66 70.21 72.64 71.94
Annual Average 70.04 69.26 70.01 69.81
2005 First Quarter 69.79 67.93 69.80 69.29
Second Quarter 70.21 68.61 70.19 69.76
Third Quarter 67.50 66.99 67.56 67.38
Fourth Quarter 60.22 59.97 60.14 60.10
Annual Average 66.95 65.90 66.95 66.66
2006 First Quarter 56.37 56.25 56.34 56.34
Second Quarter 65.41 64.59 65.44 65.18
Third Quarter 68.24 67.38 68.24 67.97
Fourth Quarter 60.76 60.63 60.80 60.76
Annual Average 62.68 62.20 62.69 62.55
2002-2006 Average 59.36 58.70 59.39 59.18


Table 4: Negotiated Barrow and Gilt Prices
Difference of Afternoon over Morning Prices

($ per cwt., including packer sold)
Period Iowa-Minn Eastern Corn Belt Western Corn Belt Nation
2002 First Quarter 0.05 0.22 0.15 0.17
Second Quarter 0.20 0.35 0.33 0.32
Third Quarter 0.24 0.37 0.30 0.24
Fourth Quarter 0.26 0.79 0.32 0.51
Annual Average 0.19 0.43 0.27 0.31
2003 First Quarter 0.40 0.86 0.43 0.53
Second Quarter 0.47 0.26 0.42 0.38
Third Quarter 0.55 - 0.09 0.44 0.12
Fourth Quarter 0.54 - 0.02 0.47 0.24
Annual Average 0.45 0.25 0.40 0.32
2004 First Quarter 0.36 0.23 0.23 0.21
Second Quarter 0.66 0.41 0.43 0.35
Third Quarter 0.39 0.25 0.35 0.43
Fourth Quarter 0.21 0.27 0.13 0.34
Annual Average 0.40 0.29 0.28 0.33
2005 First Quarter 0.00 0.60 - 0.06 0.34
Second Quarter 0.13 0.07 0.09 0.21
Third Quarter 0.39 0.21 0.28 0.34
Fourth Quarter - 0.02 - 0.04 - 0.01 0.03
Annual Average 0.13 0.21 0.08 0.23
2006 First Quarter 0.22 - 0.03 0.15 0.08
Second Quarter 0.23 0.37 0.16 0.30
Third Quarter 0.00 0.34 - 0.08 0.18
Fourth Quarter 0.36 0.35 0.22 0.35
Annual Average 0.20 0.26 0.12 0.23
2002-2006 Average 0.29 0.29 0.24 0.28


Table 5: Negotiated Barrow and Gilt Prices
Prior Day Report Price Minus Afternoon Price of Same Day

($ per cwt., including packer sold)
Period Iowa-Minn Eastern Corn Belt Western Corn Belt Nation
2002 First Quarter - 0.10 0.08 - 0.14 - 0.04
Second Quarter - 0.04 0.08 - 0.04 0.00
Third Quarter 0.06 - 0.06 0.17 0.06
Fourth Quarter 0.09 - 0.02 0.09 0.03
Annual Average 0.00 0.02 0.02 0.01
2003 First Quarter 0.07 - 0.03 0.10 0.06
Second Quarter 0.03 - 0.12 0.23 0.14
Third Quarter - 0.36 0.05 - 0.11 - 0.04
Fourth Quarter 0.14 0.06 0.27 0.29
Annual Average 0.00 - 0.01 0.16 0.11
2004 First Quarter - 0.03 0.05 0.21 0.15
Second Quarter 0.07 0.13 0.21 0.16
Third Quarter 0.29 0.12 0.40 0.38
Fourth Quarter 0.28 - 0.15 0.43 0.41
Annual Average 0.15 0.04 0.31 0.28
2005 First Quarter 0.05 0.09 0.27 0.32
Second Quarter 0.24 0.01 0.43 0.36
Third Quarter - 0.11 0.10 0.18 0.17
Fourth Quarter - 0.02 0.22 0.00 0.08
Annual Average 0.05 0.11 0.23 0.24
2006 First Quarter 0.00 0.00 0.10 0.12
Second Quarter - 0.07 0.15 0.21 0.28
Third Quarter - 0.09 - 0.03 0.17 0.20
Fourth Quarter - 0.32 0.20 0.01 0.16
Annual Average - 0.12 0.08 0.12 0.19
2002-2006 Average 0.01 0.06 0.17 0.18


Table 6: Negotiated Barrow and Gilt Prices
Afternoon Price Comparison

($ per cwt., including packer sold)
Period IA-MN Minus ECB IA-MN Minus WCB IA-MN Minus Nation
2002 First Quarter 0.49 - 0.01 0.19
Second Quarter 0.60 - 0.03 0.22
Third Quarter 1.85 0.02 0.75
Fourth Quarter - 0.06 - 0.08 - 0.10
Annual Average 0.72 - 0.03 0.27
2003 First Quarter - 0.01 - 0.05 - 0.04
Second Quarter 0.51 0.11 0.24
Third Quarter - 0.09 0.10 0.08
Fourth Quarter 0.90 0.04 0.42
Annual Average 0.30 0.05 0.14
2004 First Quarter - 0.13 0.20 0.06
Second Quarter - 0.35 0.22 - 0.02
Third Quarter 1.16 0.17 0.51
Fourth Quarter 2.02 0.18 0.86
Annual Average 0.67 0.19 0.35
2005 First Quarter 1.90 0.21 0.77
Second Quarter 1.37 0.21 0.56
Third Quarter 0.72 0.22 0.40
Fourth Quarter 0.49 0.10 0.23
Annual Average 1.12 0.19 0.49
2006 First Quarter 0.13 0.14 0.15
Second Quarter 1.04 0.25 0.59
Third Quarter 0.92 0.26 0.56
Fourth Quarter 0.66 0.29 0.48
Annual Average 0.68 0.23 0.44
2002-2006 Average 0.71 0.13 0.35


Table 7: Negotiated Barrow and Gilt Prices
Prior Day Price Comparison

($ per cwt., including packer sold)
Period IA-MN Minus ECB IA-MN Minus WCB IA-MN Minus Nation
2002 First Quarter 0.30 0.03 0.13
Second Quarter 0.49 - 0.03 0.18
Third Quarter 1.98 - 0.08 0.76
Fourth Quarter 0.05 - 0.08 - 0.04
Annual Average 0.71 - 0.04 0.26
2003 First Quarter 0.10 - 0.08 - 0.02
Second Quarter 0.67 - 0.09 0.13
Third Quarter - 0.50 - 0.15 - 0.25
Fourth Quarter 0.98 - 0.09 0.26
Annual Average 0.31 - 0.10 0.03
2004 First Quarter - 0.21 - 0.03 - 0.11
Second Quarter - 0.41 0.07 - 0.11
Third Quarter 1.33 0.06 0.42
Fourth Quarter 2.45 0.02 0.72
Annual Average 0.78 0.03 0.23
2005 First Quarter 1.86 - 0.01 0.50
Second Quarter 1.60 0.02 0.44
Third Quarter 0.50 - 0.07 0.11
Fourth Quarter 0.26 0.09 0.13
Annual Average 1.06 0.01 0.30
2006 First Quarter 0.13 0.03 0.03
Second Quarter 0.82 - 0.02 0.23
Third Quarter 0.86 0.00 0.27
Fourth Quarter 0.13 - 0.04 0.00
Annual Average 0.48 - 0.01 0.13
2002-2006 Average 0.67 - 0.02 0.19


This study was funded by the National Pork Board and the University of Missouri-Columbia.

November 2007