Evaluation of Market Thinness for Hogs and Pork
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We investigate thinness of hog and pork markets in terms of quantity and representativeness
of negotiated transactions. Transactional volume imparts marginally greater confidence in
pricing precision for Iowa-Southern Minnesota negotiated hogs than for the national carcass
cut-out, suggesting that contracts tying prices to the former rather than the latter may be more
representative of industry conditions. Extending mandatory price reporting to pork may
remedy this discrepancy. Despite declining volume, terminal hog markets may price accurately
off of Iowa-Southern Minnesota prices. Hog quality differentials across procurement
methods are documented, and quality of negotiated hogs is shown to decline with declining
volume.