Producers who believe structural problems or packer conspiracies lurked behind last year’s low pig prices won’t get any satisfaction from a mandatory price reporting system, says a hog market analyst.
All that mandatory pricing will do is create an expensive system that provides more information than almost anyone needs, encourage inefficient marketing and deal with a problem that has already disappeared.
“If there is a perceived problem (with the packer-producer relationship), I fail to see how mandatory price reporting is going to be a part of the solution,” said Kevin Grier, an analyst with the George Morris Centre in Guelph, Ont.
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“Mandatory price reporting would not address those problems.”
The United States department of agriculture has unveiled a system that would force all substantial commercial packers to report all of the prices they pay for pigs and the prices they receive for cuts.
The U.S. government designed the system because producers were enraged after pig prices crashed in late 1998 and stayed critically low through much of 1999. Producers complained about structural problems in the industry, about packer collusion to keep prices low, and about power imbalances between packers and producers.
Many Manitoba producers are now also calling for mandatory price reporting, since Manitoba Pork Marketing Co-operative stopped releasing its prices to the public.
Grier said there is no need for mandatory price reporting, mainly because it won’t work.
There is already a lot of price information available to any producer who wants it, said Grier. The USDA supplies national and state-by-state numbers throughout the day.
“I use it all the time myself, every day,” said Grier.
In Canada some producer organizations list daily prices, such as SPI in Saskatchewan and Western Hog Exchange. And the basic daily price from any packer can be obtained by a phone call.
“Prices aren’t secret,” said Grier. “Anybody can call up the Brandon buyer and ask him what he’s offering.”
Many producers suspect there a big differences between the prices packers give average producers and those they give producers with whom they have contracts.
But Grier said a mandatory price reporting system wouldn’t reveal anything useful. Simply recording the price a contracted producer receives does nothing to reveal his long-term returns or the terms and conditions that are part of the contract.
“If we don’t know the terms and conditions, then prices themselves are meaningless.”
Grier worries that focusing on traditional auction-type price listing is looking at the past, not the future.
“As the industry moves to more sophisticated, vertical alignments, why should government encourage reporting of old style sales and price transactions?”
Mandatory price reporting is dealing with a situation that has ended and has a simple explanation.
“The worldwide supply of meat and consumer demand for that meat will determine the overall price level.”
The U.S. government’s plan to force packers to report their prices is caused by its desire to be seen “doing something” about the plight of small producers. It’s not a good way to formulate policy, he said.
“Of course, politicians and government cannot do anything about the underlying supply and demand forces that are at the root of low prices,” said Grier. “As a result they search instead for anything simple, but visible, in order to be seen doing something to help.”
