Cash hog sales continue to lose traction even though they still determine the price paid for about half of the market hogs sold in the United States. Annual studies since 1999 show the percentage of hogs sold at negotiated prices has fallen from 35.8 percent for all of 1999 to 9.2 percent in January 2008.

“If the rate of decline in the percentage of negotiated or spot-market hogs returns to the pre-2006/2007 rate, it will increase the urgency for the industry to find another price discovery option for most marketing contracts,” says Glenn Grimes, University of Missouri agricultural economist. “However, the slowdown in the rate of decline in negotiated or spot purchases gives us some hope that the number will stop at around 10 percent of total slaughter. If it does, we believe it will do a satisfactory job of representing the true supply-and-demand situation.”

Grimes and his colleague Ron Plain, and Steve Meyer, president of Paragon Economics, conducted the analysis by reviewing reports created by the Livestock Mandatory Reporting Act of 1999. Those reports cover all but the smallest harvest facilities.

By adding the percentage of hogs purchased in the negotiated markets to the percentage purchased on hog- or meat-market formulas, the 2008 study shows that the price of at least 46 percent of U.S.hogs was directly determined by the negotiated market. “The true percent is higher because many packer-owned and packer-sold hogs are priced with a market formula,” Grimes notes.