OCM-PR-6: Hog Prices
Press Release - USDA Finds Price Reporting Inaccurate

Contact: H. Clay Daulton (209) 674-8226 For immediate release

Linus Solberg (712) 424-3843 October 15, 1998 The USDA announced, on October 8, 1998, the results of its investigation into Western Cornbelt hog procurement practices. The investigation revealed that the prices reported for a "base" hog did not reflect actual transaction prices and were generally lower than prices being paid. This study confirms that the voluntary price reporting system which the USDA's Market News Service utilizes to inform producers and the public about livestock and meat prices is misleading at best.

"The obvious solution to this problem is to put a mandatory price reporting system into place which reflects carcass and meat characteristics," said OCM president, H. Clay Daulton of Madera, California. "In this era of concentrated market power in the meat industry, the most basic step for the USDA to take is to provide real-time reporting of actual prices paid for livestock by requiring the big meat packers to utilize computer software to compile and uplink prices to an internet site every 30 minutes so the information is available to all livestock producers."

"Nobody, except the packer, knows what the price for hogs or cattle is on a given day," stated OCM member Linus Solberg of Cylinder, Iowa. "When I sell hogs, it is essential that I have access to actual price information so I can intelligently negotiate terms of sale. This is the case in the stock and futures market. It should also be the case in the cash livestock market."

The investigation covered a one month period in January 1996 and included 4 firms and 12 plants in Iowa, Minnesota, Nebraska and South Dakota. The USDA also reported that 79 percent of the purchases in their sample were spot transactions, equally divided between live and carcass merit purchases. Over 20 percent of the hogs were purchased through various marketing agreements. The spot purchases tended to include the smaller producers and lower prices while the marketing agreement arrangements tended to include the larger producers and higher prices paid.

"The results of this study strongly suggests that large producers, such as factory farms, are receiving prices which are unfairly high in comparison to prices paid to family farmers for like quality hogs. The Packers & Stockyards Act is supposed to prohibit such discrimination. The USDA has been incredibly inactive in guaranteeing a fair and open marketplace for independent producers," said Solberg.

"Additionally, the amount of money spent on this investigation was totally unnecessary," continued Solberg. "If the USDA would take the logical step of requiring mandatory price reporting, it would have this data in computerized form every day of the week. There would be no need to commit money and personnel to determine what the price is. Rather, the USDA could efficiently focus resources upon enforcing the rules of competition governing the packing industry to make sure that the independent producer is not being swindled."

The OCM supports not only mandatory price reporting, but increased funding and personnel for the Grain Inspection, Packers and Stockyards Division of USDA to allow a more comprehensive and focused ability to make sure that the livestock commodity markets are fair, open and competitive so that independent producers are not relegated to second class status in the markets.