New era in pork marketing generates new price reporting system

Wednesday, November 24, 2010

by BETTER FARMING STAFF

Industry observers note, somewhat wryly, that the world isn’t going to end on Dec. 4 when a new era in pork marketing is launched. But the current method of reporting prices will look different, says Ontario Pork Industry Council chairman Stu DeVries.

“There will be one large subtle change” in price reporting after the beginning of the “new era” in hog marketing begins,  the general manager for Total Swine Genetics told the Ontario Pork Industry Council meeting in Stratford Tuesday. Comparing prices reported before and after Dec. 4 will be like comparing apples and oranges, DeVries says. “We are dealing with a very different price reporting system.”

 Packers and marketers will still report prices to Ontario Pork Universal Services. That is mandatory. There will be a one week lag in the price reporting while settlement is made with producers.

The prices that Ontario Pork publishes will no longer be reported on 100 index hogs. Instead, the reported average price will be an “all in” price, taking into account the index, and premiums paid for carcass characteristics such as loins, non-carcass premiums paid for benefits to packers such as Sunday evening delivery and pre-booking hogs online, and contract specifications such as certified non-use of certain pharmaceuticals. The difference on a dressed weight basis could easily boost the reported price $15 per hundred kilograms, from $130 to $145 in one swoop, without actually putting more dollars in producers’ pockets, DeVries told the meeting. 

Ontario Pork general manager Ken Ovington says currently the price reported is called the “dollar per hundred kilogram, dressed weight, 100 index.” 

Starting Dec. 4, the price will be reported as “dollars per hundred kilogram, dressed weight, total value.”

Ontario Pork will publish, on its website, a formula that will allow producers to convert between the two pricing formulas, Ovington says. 

Ontario Pork Universal Services will continue to report, on a daily basis, the CME constructed price, converted to Canadian dollars. Many producers settle pigs on contracts based on that price, Ovington notes. There will be a difference, however, in how hog numbers are reported. 

Currently, on Friday Ontario Pork reports the number of hogs sold that week. 

Under the new system there will be a time lag of four to five working days. So on a Thursday it’s likely that hog numbers will be reported for the five days of shipments ending the previous Friday. There will be a lag as processors and marketers make their reports, says Ovington. 

There are a lot of “nuts and bolts” changes involved in the new marketing system that haven’t been decided yet, Ontario Pork chair Wilma Jeffray says.

“It’s a good idea to get your lawyer to look (a new contract) over,” Devries says. 

More changes may come later. Hog prices will still be paid based on freight on board at the country yard for another six months. Then it will be reviewed, Jeffray says. BF