Hog Price and Volume Comparisons across Alternative Sale Types, Emphasis on COVID-19 Disruptions

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2021-09
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Butcher, Ezra
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© Author(s) 2021
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Schulz, Lee
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Center for Agricultural and Rural Development

The Center for Agricultural and Rural Development (CARD) conducts innovative public policy and economic research on agricultural, environmental, and food issues. CARD uniquely combines academic excellence with engagement and anticipatory thinking to inform and benefit society.

CARD researchers develop and apply economic theory, quantitative methods, and interdisciplinary approaches to create relevant knowledge. Communication efforts target state and federal policymakers; the research community; agricultural, food, and environmental groups; individual decision-makers; and international audiences.

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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

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The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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In 2020, due to COVID-19, swine and pork markets in the United States experienced the worst disruption since 1998. We seek to inform discussions about marketing outcomes and possible structural changes by establishing performance baselines and providing definitions and descriptions for transactions between producers and packers. From 2010–2020, prices were highest in 2014 and lowest in 2020. We estimate simple models to see how changes in pork packing plant capacity utilization impact market hog prices by sale type. Results indicate that negotiated prices are the most sensitive to increases in utilization, decreasing 2.34% for every 1% increase in utilization. Negotiated sales volume has become incredibly thin, comprising only 1.52% of all hogs reported in 2020, compared with 14.65% back in 2002. There is a need, on occasion, to modify how data is published which directly contributes to the effectiveness of Livestock Mandatory Reporting (LMR). For example, other purchase arrangement sales increased in volume in 2016 as hogs raised without ractopamine or antibiotics were reclassified from swine or pork market formula sales. Sales based on the CME Lean Hog Index or Pork Cutout Index have been reclassified as swine or pork market formula sales. The correlation of pork carcass cutout values and negotiated hog prices has deteriorated from 0.919 in 2013 to 0.255 in 2020. Separating swine or pork market formula sales into swine formula sales and pork formula sales could improve price correlations. Summaries of price distributions provide a snapshot of marketing outcomes and aid in bringing further transparency to the marketplace.
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