Download PPIC/RAC * Spring 2011

PPIC/RAC – Spring 2011
Wholesale Pork Cuts - Mandatory
Price Reporting
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
Paragon Economics, Inc.
From information, knowledge
Why, How, What, etc



Only 3-5% of pork is reported – cutout?
MPR for pork was added when MPR was
reauthorized in 2010
Language required Negotiated Rulemaking
- Not often used by USDA
- Involves affected parties in writing the
Proposed Rule

Committee representing various groups
- 12 members including NPPC, AMI, NAMP,
GMA and FMI
Paragon Economics, Inc.
From information, knowledge
Process so far



2 meetings to date – Last one scheduled
for May 10-11
Cooperation has been good and
consensus has been reached on several
items
Some key items remain, including
- FOB plant vs. FOB Omaha
- Transition period during which both
voluntary and mandatory run
- Offal/variety meats
Paragon Economics, Inc.
From information, knowledge
Pork MPR Ground Rules




Packers report ALL sales of “wholesale
pork”
Packer: 100,000 head or more/year
Not everything “reported” to USDA will be
“published” by USDA in a report – wording
Confidentiality rules (3/70/20) will apply
since reporting is mandatory
Paragon Economics, Inc.
From information, knowledge
Current wholesale pork definition
 "Fresh and frozen primals, sub-primals,

cuts fabricated from sub-primals, pork
trimmings, pork for processing, pork offal,
and variety meats, excluding portioncontrol cuts, flavored, tray pack, cured,
smoked, cooked, ground and diced pork
products”
Some questioning of including of “pork
offal and variety meats”
Paragon Economics, Inc.
From information, knowledge
Types of sales and delivery windows

4 categories/windows
- Negotiated spot (0-14 boxed, 0-10 combos)
- Forward contract (15-90 boxed, 11-90
combos)
- Forward contract (90 days and more)
- Formula marketing agreement


NOTE – Day 0 is the production day at the
plant
Packer-packer sales included, intracompany sales are NOT
Paragon Economics, Inc.
From information, knowledge
Several other items have been agreed to







Fresh vs. distressed vs. frozen
Domestic, NAFTA, non-NAFTA
A brand does not exclude a product from
negotiated spot or put in a separate spec
Any marketing funds will be deducted
Brokerage fees are a sales expense and
will not be deducted
Specialty products
Enhanced product
Paragon Economics, Inc.
From information, knowledge
Big Issue 1: FOB Omaha vs. FOB Plant

USDA opposes FOB Omaha
- Does not want to adjust prices
- Uses current beef system as an example

Overwhelming majority of the committee
supports FOB Omaha
- Current prices are FOB Omaha
- More price stability – removes transport

Going to FOB Plant will make 2 BIG shifts
- Voluntary to mandatory – include all cuts
- FOB Omaha to FOB Plant Paragon Economics, Inc.
From information, knowledge
Big Issue 2: Transition/overlap period


Almost unanimous support for 12 months
Mandatory running behind the scenes as a
“beta” test
- Work out any bugs (remember beef?)
- Build 12 months of data to compare



PROVIDES RELATIONSHIPS TO ADJUST
PRICING AGREEMENTS TO MANDATORY
USDA seems resistant – cost is an issue
Letter to Craig Morris – not signed by FMI
Paragon Economics, Inc.
From information, knowledge