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US Swine Economics Report - 10th December 2003.

by 5m Editor
11 December 2003, at 12:00am

US - Regular report by Ron Plain on the US Swine industry, this week looking at the trend in recent months for packers to buy hogs later in the day.

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Ron Plain
Ron Plain

There has been a trend in recent months for packers to buy hogs later in the day. Under the mandatory price reporting law, large hog packers must report their daily purchases as of 9:30 each weekday morning, 1:30 in the afternoon and then all prior-day purchases the next morning. From May through December of 2001, packers purchased 30% of their negotiated hogs before 9:30 am. For calendar year 2002, packers purchased 26% of their spot market barrows and gilts early enough to include on the 9:30 am report. For the first 11 months of 2003, only 24% of the negotiated sales were included on the morning report.

The same is true for USDA's afternoon report. During the first 11 months of 2003, only 82% of negotiated purchases of barrows and gilts occurred before 1:30 in the afternoon. Last year, 86% of negotiated purchases took place in time to be included on the 1:30 report. (The afternoon report also includes all hogs from the morning report.)

The declining number of hogs purchased early in the morning means that on some days USDA's morning hog price is based on a rather small number of hogs. This is especially true of the regional price reports. This trend is particularly troublesome to producers who have formula contracts tied to the one of USDA's regional morning price reports.

You may think that packers are buying hogs later in the day because prices are lower in the afternoon. However, the mandatory price data indicates the opposite is true. The average price paid for negotiated hogs purchased before 9:30 am during January-November 2003 was $51.82/cwt of carcass weight. The average price paid for hogs purchased between 9:30 and 1:30 was $52.29/cwt and the average price paid for hogs purchased after 1:30 in the afternoon was $54.37. On most days, packers are willing (or forced) to raise their bids as the day progresses.

USDA began issuing detailed hog price reports under the mandatory price reporting law in the spring of 2001. Unless Congress acts, that law will expire in October of 2004.

5m Editor