An electronic grain exchange believes its technology might help the Canadian hog industry solve its price discovery dilemmas.
Since provincial hog organizations lost their monopoly on hog sales, industry participants have wrestled with how to establish a cash price index for hogs.
Sheldon Fulton thinks an electronic exchange for hogs, where buyers and sellers could post cash bids and offers, might be a way for the industry to reveal what hogs are trading at without revealing commercially sensitive information.
Fulton, chief executive officer of Agralink Exchange Ltd., said his company has been talking to major hog producers, processors, Manitoba Pork and the Manitoba government about the idea.
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“Right now, basically everything is a price derivative from Chicago (Mercantile Exchange), and that’s not necessarily the correct price,” Fulton explained.
Chicago futures prices reflect cash prices somewhere in the U.S. Midwest, he said.
But the Canadian market has some different short- and long-term factors at play that affect supply and demand, and impact cash prices, he said.
Chicago futures prices don’t always pick up those factors, said Fulton, meaning price signals aren’t always clear to the Canadian industry.
The Winnipeg Commodity Exchange is looking at the potential for a Canadian hog futures contract, but has had found it difficult to pin down the underlying cash prices.
The electronic cash exchange would be complement the futures exchange’s efforts, said Fulton.
