It was a long road for the industry to get mandatory price reporting implemented, but now its end may be in sight.
The Mandatory Price Reporting Act of 1999 was passed in March of that year, and went into effect in April 2001. The legislation is set to expire in October 2004 – unless there is another legislative act to keep it going. So, in 18 months, price reporting may no longer be mandatory.
USDA’s mandatory price reports have presented more additional data than the voluntary reports did, says Ron Plain, University of Missouri agricultural economist. However, some producers have been disappointed with mandatory price reporting because they hoped it would reveal that hog prices were higher than were being reported under the voluntary system. Instead, mandatory price reporting confirmed that the voluntary reports had been accurately reporting prices. Anyone hoping that the reports would help raise hog prices, has been disappointed as well.
“Mandatory price reporting has had no noticeable effect on hog prices,” says Plain. “With the way hog prices fluctuate it’s impossible to tell if the packers’ costs were passed on to the producer in terms of lower hog prices or not.”
Plain says producer use of the reports varies greatly by operation size. Producers running “large” operations used the reports almost immediately. Plain is unsure how many pork producers use the reports today.
Still, three of USDA’s top 10 accessed reports involved mandatory meat reports and livestock reports, which includes one of the hog reports. The hog report gets about 4,200 hits per week according to Weldon Hall, assistant branch chief for the livestock and grain market news group of USDA’s Agricultural Marketing Service.
You can access the reports at www.ams.usda.gov/lsmn pubs. From there, the site is menu-driven so you just click on the report that you want to see. (For a more detailed list of the hog and pork price reports available see the sidebar below.)
Hall says one major challenge, for producers using the reports, is comprehending what numbers they are looking at. One cure for that problem is the contact link on the reports’ page that allows you to send an e-mail to AMS for help in using the reports. AMS will then send a reply with further instruction. You also can contact the AMS Des Moines, Iowa, office at (515) 284-4460.
Mandatory price reporting did start with a whimper, rather than a bang, as access problems hampered the electronic system and confidentiality clauses limited the information that could be released.
Accessibility problems have apparently been remedied. Hall points out that since its inception in 2001, the reports have been open and accessible 99.6 percent of the time. During the first quarter of 2003, they have been accessible 100 percent of the time.
Changes in the confidentiality clause have had a big impact on the reports’ effectiveness. The original “3/60 rule” stated that the top three packers in any given region could not report more than 60 percent of the information. This limited the information that could be released, and the daily turnover was too high, says Hall.
The rule was modified to the “3/70/20 rule,” stating that there must be at least three packers buying in a given market 50 percent of the time over a 60-day period. In addition, no packer can be reporting 70 percent of the data, and no one packer can be the only one reporting 20 percent of the time. That rule is much less restrictive, and has resulted in much more data. “More than 98 percent of the reported data is released, and reports are available that cover more than 92 percent of daily federal slaughter,” says Hall. “Mandatory reporting has much more information, especially on contract and formulated sales than was available through the voluntary reports.”
Mandatory price reporting is an evolving system and changes are likely to occur in the future as well.
“Right now we’re working to get live-hog prices quoted, in addition to the carcass prices,” says Hall. “We’ve been looking at the data to see what we can do and hopefully in the next few months we’ll be reporting live-weight prices as well.”
Another addition Plain would like to see is the mandatory reporting of pork leaving the packing plant. With the spot hog market dwindling more each year, eventually market-hog prices might need to be based on pork (meat) prices. Consequently, mandatory reports in that arena would become necessary. The system currently requires packers to report prices on boxed beef shipments, so it seems natural that pork would follow suit.
Talking about changes to mandatory price reporting may be a moot point, unless new legislation renews the reports. If mandatory reporting expires in October 2004, there would likely be no price transparency in the hog market.
“Packers spent a lot of money to comply with mandatory reporting, and I don’t think they would be very happy to resurrect the old voluntary system,” says Plain.
A return to voluntary price reporting also would be costly to AMS. Employee turnover was high when the switch to electronic mandatory reporting occurred. The same could occur if AMS returned to a manual, voluntary reporting system. Using the mandatory-price-reporting format for a voluntary system, doesn’t appear to be realistic, says Plain.
“Under the voluntary system there was high compliance because packers didn’t have to provide much detail,” says Plain. “It’s unlikely that packers will send in the same detailed information voluntarily.”
AMS’ Livestock Market News department will start the review process this summer to outline responses for Congress concerning price reporting legislation. To make suggestions e-mail John VanDyke at email@example.com.
Finding the Right Report
With mandatory price reporting comes a plethora of information, but that information can be intimidating if you don’t know what you’re looking for.
“The most useful report to producers is the ‘prior day slaughter report’,” says Ron Plain, University of Missouri agricultural economist. “That report provides detailed data, percent lean, loin-eye depth, information on hogs bought on the spot market as well as those under specific types of contracts.”
To get that report, start by going to http://www.ams. usda.gov/LSMNpubs/index.htm. Place your cursor over the “Swine” pull down menu and highlight “Slaughter,” “Direct,” “National” and then click on “Daily Direct Hog Prior Day – Slaughtered Swine.” The “Daily Direct Hog Prior Day – Purchased Swine” also can be found at the same location.
Regional information can be accessed from the menu bar much the same way, however, click on “Regional”instead of “National.” You will find morning and afternoon reports available.
If you are interested in the voluntary meat reports, you can go to the pull down menu “Meat”and highlight “Pork.” From there you can click on the “National Carlot Pork Report,”the “Weekly USDA Byproduct Drop Value Report,”the “Pork and Beef Variety Meats Report,”or the “Tallows, Proteins, and Hides Report.”
Monthly Reports’ Future in Doubt
As part of the original Mandatory Price Reporting Act of 1999, USDA’s monthly Hogs and Pigs Report could become extinct in October 2004, as well.
That may not be such a bad idea, according to National Pork Producers Council delegates at this year’s Pork Industry Forum. The producer delegates passed a resolution instructing NPPC to support the elimination of the monthly Hogs and Pigs Report “as soon as possible.”
The idea behind the monthly report was to get a clearer picture of pork production by providing more frequent snapshots, but that has not been the result.
“The monthly Hogs and Pigs Reports have had no impact on the industry, or price transparency,” says Ron Plain, University of Missouri agricultural economist.
In fact, the only impact is that it has irritated producers because of frequent inquiries that the surveys demand. Plain says calls are often made before producers have a chance to update their records for the previous month. The added sampling hassles made the monthly reports more unreliable, and rendered them less useful than they could have been.
Plain hopes any new legislation would renew mandatory price reporting, but kill monthly pig-crop surveys. USDA’s more detailed quarterly Hogs and Pigs Reports should continue, regardless of the monthly reports’ fate.