Get ready for mayhem in the pork markets.
That’s what market analysts and watchers are doing, as applecart-overturning regulations in California and Massachusetts come into force soon and will push hog and pork into channels we can’t currently understand.
It’s going to be harder than ever to know the base price for North American hogs and pork, since pigs and pork sold into and produced in those two high-population states won’t reflect the broader market and can’t be included in average prices.
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“Hogs and pork that meets these requirements by definition becomes a specialty item and is treated as such,” noted the June 1 Daily Livestock Report of the CME Group, referring to how the United States mandatory price reporting system will need to grapple with pigs and pork eligible to be sold in California and Massachusetts.
“It is a fair bet that California and Massachusetts compliant pork will be more expensive. But if you think these higher priced pigs and higher priced pork will filter into the value of the cut-out, think again.”
The CME hogs index will cut out these new specialty hogs from the general price, instead including them in categories for “non-carcass merit premiums,” “other purchase arrangements” and “specialty pork.”
Yeesh, that’s going to get messy.
Figuring out the true price of a market hog these days is already nightmarish. Only a tiny — some say unrepresentative — single digit percentage of today’s hogs are sold on a cash basis. Most are priced off complicated formulae involving farms, packers and other parts of the production and processing system. Each pricing syndicate uses different formulae, incentives and penalties.
With many hogs being produced in vertically integrated systems, millions of head in the North American herd never get priced in any way we’re used to.
However, the indexes are important because many contracts and arrangements are based upon them. Any index or posted price now, in light of the new realities in California and Massachusetts, is going to be even dodgier. The amount of commodity pork and commodity pigs is shrinking by a bunch.
I know I’m going to be hearing a lot about this at the World Pork Expo in Des Moines, Iowa, which I’ll be at the day this issue of The Western Producer is published. It’s been a chaotic and unsettling time in the hog business, with losses piling up after the incredible volatility of the pandemic brought huge losses and then major profits for many.
The last thing the hog industry and hog markets needed now was chaos and confusion, but because of democracy, we’ve got it.
Special interest groups got referendum questions about sow housing onto state ballots in the places I keep mentioning. Those measures passed, the California law survived a challenge to the U.S. Supreme Court, and the regulations are about to be triggered.
While ostensibly aimed at getting rid of individual stalls for gestating sows and providing open housing instead, California’s regulations are expected to prevent most out-of-state pork, even from existing open housing systems, due to non-standard per sow size requirements.
As I’ve written about here before, the market impact could be enormous, with millions of tonnes of California bound pork being re-routed into other markets, while California grocery store shelves go bare. If pork disappears in Cali this summer, imagine the rioting of BBQ fans suddenly finding out they can’t get ribs or pork chops for the grill.
That would see prices crash everywhere commodity pork is still allowed and see prices skyrocket in California and Massachusetts.
What’s most likely to happen? I expect to hear that from leading experts at the World Pork Expo, from which I’ll be filing live blog posts on our website, so check online for those at www.producer.com.
We’ll also have online coverage at our new “Hog Hub,” a digital platform you can go to where all of our hog and pork coverage will be arranged so you can easily find what you’re looking for. Check it out at www.producer.com/content/hog-hub/.
Markets work best when vexatious regulations don’t make it impossible to do business. Markets, to a degree, are created by regulations, so it’s not wrong for markets to be subject to regulations and the law-of-law.
But when well-meaning rules accidentally collide with a well-functioning system, we get problems. That’s what’s happening with the new restrictions on pork, and it’s also happening on this side of the border with environmental requirements clamped onto agriculture research.
We’ve seen this with hog research funding, which now needs to justify itself by claiming it is in some way related to reducing greenhouse gas emissions.
As Robert Arnason and I report in this week’s paper on pages 12 and 13, that obsession with twisting every bit of government spending into a climate change initiative is strangling the rational crop variety development farmers and the agriculture industry depend upon.
It’s fine to say that markets adjust, people adjust, industries adjust, society adjusts and we all just move on and evolve and adapt to change. But some changes aren’t good. Some make little sense.
We have to live with change. We have to survive.
But with the hog markets, let’s hope the next few months aren’t as nightmarish as they might be. It’d be good not to turn this into a season of Survivor: Hog Markets.
And with Canadian agriculture funding, let’s hope we can find a way to make research funding decisions that do the right things, not just sound the right ways.
