Genesus Global Market Report: USA, June 2020, hog producers' lives matter
There is no doubt that the year 2020 has not provided the world with a clear vision. Just when the lockdown from COVID_19 was being lifted, many of the major cities being looted and burned, so curfews are being imposed upon the citizens. This has no doubt affected banking, businesses, farmers, livestock producers, and the stock market.
11 June 2020
3 minute read
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There has been an ongoing debate about what producers are getting paid compared to the final price of meat in the grocery store. I have been very vocal that there is a disconnection between hog prices and the futures market. There are several different formulas (Western Corn Belt, Eastern Corn Belt, 2 Day Lean, National Average, Futures, Cut-Out Value ….) used to come up with a price but it seems the livestock producer always comes out on the losing end of the stick. It is truly a mess, almost as bad as what our urban centers are dealing with right now.
Someone recently told me he believes in two years there will be no cash market of any kind and looking up to the government to come up with a solution to this dilemma will never happen. Do we need a single price set for all hogs sold, definitely not, but the price differences of contracts are like riding a roller coaster…way up or way down!
I have seen cash bids of 3 cents an lb. and that same week someone was getting 90 percent of the cutout value. The system is broken and all it will take is a little common sense to fix it.
There has to be a formula that works for the livestock producer and the packer. The name of the game is to make a profit on hogs, but it should not be little to no profit for one side and a huge profit for the other.
I don't like to find fault with something and not offer a solution. Perhaps a board made up of packers and producers to come up with base prices that are fair for both sides. The contracts can be adjusted based on the quality of the hogs or what each packer believes that quality is. Maybe it is finally time to grade pigs to a standard of Select, Choice, and Prime.
If we do not come up with a solution soon, the hog producers will be few and far between and the pork market will definitely suffer. It is our job to feed the world, as pork is the most consumed meat in the world, and to allow this to happen we need to fix a broken system.
To borrow from a very popular phrase right now, and take this with a grain of salt…hog producers' lives matter!
