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The Mechanics of Hog Pricing in Ontario

by 5m Editor
15 October 2001, at 12:00am

By Ontario Pork - Market hogs are sold on several different arrangements in Ontario. Producers may choose between marketing their hogs on the Pool, the Pool Plus program, or a variety of direct contracts with meat packers.

Information provided courtsey Ontario Pork
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Currently, most hog prices in Ontario are based on Ontario Pork’s standard formula price. The standard formula price is based on the US National Cost price, the Canada-US exchange rate, standard dressing percentages, metric conversion, and a negotiated divisor.

Even though most prices in Ontario are based on this similar formula, prices are not always the same, and sometimes move in opposite directions. The single most important reason prices move in opposite directions is timing. Some price agreements are very responsive to current market conditions, while others are based on market prices from the previous week.

The Pool price and contracts based on rolling averages are examples of prices that may move drastically before other prices “catch up.” The Pool Plus price and contracts based on the previous week are examples of prices that follow the market; these prices may move higher even as current market prices are moving lower. Because prices can move in different directions, the spreads between them will vary from week to week.

The Pool and Pool Plus prices are calculated each Thursday. In the meantime, Ontario Pork reports a daily average price and a weekly average price to give an indication of where prices are headed. These daily average prices are reported on radio, television, the Internet, and in several newspapers. The daily average price is based on hogs sold on the Pool program and on the Pool Plus program, but it does not include contract prices. Again, because the Pool and Pool Plus prices can move in opposite directions, the average daily and weekly prices that are reported will only indicate a general trend.

Looking at longer time periods, Pool, Pool Plus, and contract prices generally move in the same direction.

Source: Ontario Pork, October 2001