Using the futures market to forward price hogs typically stabilizes but does not increase the price received. In recent months, the price that packers have paid for hogs contracted using the CME lean-hog futures as a base price has been higher than the negotiated spot-market price.
Mandatory price reporting provides detailed data on the prices that packers pay for hogs. From September 2007 through mid-April of this year, the national negotiated base price paid for barrows and gilts averaged $59.96 per hundredweight of carcass. The national average base price that packers paid for hogs forward-priced using the futures market was $66.34 per hundredweight, or more than $12 per head higher. For producers concerned about price risk, the futures market is still attractive.