Analysis of Increase on U.S. hog marketing under prearranged producer-packer marketing agreement and influence on U.S. pork futures trading at Chicago Mercantile Exchange (CME)

摘要

U.S. pork production sector is undergoing a significant change in its size and ownership structure. Further, the marketing linkages of pork producers with meat packers are changing dramatically. In the 1980 s. there were very limited arrangements for contract production and long-term marketing in the pork sector, but in 2000, long-term marketing contracts have rapidly expanded. The objective of this survey is to analyze these changes of marketing and influence to CME pork futures market. The main findings of this study were as follows: (1) Pork is still popular meat to U.S. consumers and per capita consumption of pork in U.S. has been stable since 1970. (2) U.S. pork supply from North America Free Trade Agreement (NAFTA) area especially U.S. & Canada has been between 97.2 percent and 99.0 percent of total supply and U.S. pork export has been only between 1.5 percent and 6.6 percent of total supply since 1990. U.S. hog production have been mainly targeted to U.S. domestic consumers, not to export.Therefore, U.S. hog production and distribution system has worked mainly for U.S. domestic market. (3) Average coefficients of variation per year on U.S. domestic pork prices during the period of 1995-2000 were 12.34 percent/year on producer prices, 8.99 percent/year on wholesale prices. 2.44 percent/year on retail prices. U.S. pork producers have taken the largest risk on price volatilities within U.S. domestic distribution. (4) The use of marketing contracts between U.S. hog producers and meat packers has increased sharply in recent years. Nearly only 5 percent of the U.S. domestic hog mareketing in 1980 were under some type of prearranged arrangement with the packer but this number was up to nearly 14 percent in 2000. The dominant type of agreementis a formula price contract, especially for the largest producers. This contract is ongoing agreements between the packer and producer in which the selling price is linked with the movement of cash price. (5) The more long-term contracts between producers and packers will increase, the less price risks the producers will take. In 1997, Lean Hog futures trading started on Chicago Mercantile Exchange (CME) instead of Live Hog, which is the CME Lean Hog Index, a two-day weighted average of USDA Lean Hog carcass slaughter cost prices. Lean Hog futures trading have cash-settlement system. The marketing volume on hog cash market has so much decreased that we guess the estimated volume of Lean Hog would be less than volume of Live hog.