Last month, President Bush signed a bill extending the Livestock Mandatory Price Reporting Act of 1999 through Sept. 30, 2005. Now, the real work begins in an attempt to get a long-term extension.
“My guess is we’ll see a significant extension in 2005, with some minor tweaking of the law,” says Ron Plain, University of Missouri, agricultural economist.
So far, MPR has been a rousing success. Three times each day it gives producers detailed information on what prices packers are paying for hogs. Another report provides information on how many hogs are purchased under various types of market contracts. (See sidebar.)
“Mandatory price reporting provides a lot more detailed information, particularly regarding the 85 percent or more hogs sold on contracts,” says Steve Meyer, Paragon Economics. “Under voluntary price reporting that information wasn’t reported anywhere.”
USDA performs periodic spot-check audits on every packer. So far, packers have been in compliance. The law calls for charges to be brought on any packer that shows a “pattern of abuse.”
Still, no system is perfect, and adjustments are likely. One adjustment being discussed is to change the size of packing plants required to report. The prospect is to change the minimum requirement from the current 100,000 head annual slaughter to 75,000 annual slaughter. The reports now catch more than 90 percent of U.S. barrow and gilt slaughter, but lowering the reporting requirement might provide a better picture of sow slaughter, says Plain.
Other potential changes to the reports include adding hogs purchased on a live-weight basis, publishing price distributions instead of only highs and lows, and including weekly pork exports. Revealing pork export prices might give too much information to our competitors, but reporting export quantities might help industry analysts, says Meyer.
The biggest change under consideration is to include pork prices with the live-hog prices already being reported.
“It would be desirable to have more precise data on pork prices, so that more market contracts can be based off of those prices,” says Plain. “Most contracts are now based off of the spot market, which has dropped to about 11 percent of all hogs sold. About 6 percent of the hogs are currently formulated off of cutout value, but that number will likely grow.”
That may be easier said than done. There are many more pork specifications to report than, say beef specifications, which are already being reported. Reporting pork prices can be complex. For example, the question of how to report pumped pork needs to be addressed, he adds.
“The devil is in the details as far as any changes go,” says Meyer. “If the industry makes the right changes everyone can benefit.”
The What and Where of MPR
Mandatory price reporting allows producers and industry personnel to access a plethora of information not previously available. But if you don’t use it, that information is worthless.
Mandatory reports include a morning report released at 10:30 a.m. CST that shows what packers paid for hogs before 9:30 a.m. Prices are offered for four regions: Eastern Corn Belt, Western Corn Belt, Iowa/Minnesota and National.
The next report is available at 2:30 p.m. CST. It reports the hogs that packers purchased before 1:30 p.m. on that day for the four regions.
The prior-day-purchased report appears at 6 a.m., summarizing what hogs packers bought from midnight to midnight on the previous day. It shows the greatest number of hogs purchased, so it provides the most pricing information.
The last report is the prior-day-slaughtered-swine report; it’s the one that Ron Plain, University of Missouri, calls the most useful to industry analysts. It includes base price, net price, weight, lean percentage, whether the hog was sold on the spot market or a contract, and whether it was packer owned.
To access the reports go to www.ams.usda.gov/lsmnpubs/index.htm. From there click on Swine, then Slaughter, then Direct. This will drop down a menu of National or Regional choices, all of which are mandatory price reports. This should provide plenty of information to make marketing decisions. What you do with the information is up to you.