Q:

How does the USDA decide on the prices of live hogs?

A:

Quick Answer

The USDA determines value by using the base cost lean calculations. These calculations are determined by individual packer's lean value buying programs, which are based on the hog's back fat and 6- to 7-square-inch loin eye area, which are both measured at the 10th rib.

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How does the USDA decide on the prices of live hogs?
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Full Answer

All prices are included in the national reports. The reports are based on both purchased swine and slaughtered swine, but regional reports are published only for those purchased. The country is split along the Mississippi River, creating two categories -- the Eastern and Western Corn Belt reports. Subset of the prices in the Western Cornbelt Report is used to compile the Iowa-Minnesota Report. However, because the purchased swine have yet to be processed, packers do not know their carcass characteristics and the premiums/discounts they are to earn, according to Nationalhogfarmer.com.

They only know the number of animals that were purchased and the base price paid for each. Therefore, the prices given in the daily purchased swine reports are very different because a packers base and premium ideals differ. Base prices cannot be compared, they generally represent figures for hogs of different levels of weight and leanness. There is, however, one net price given on the purchased swine reports, the animals that are bought on the lightweight basis. The previously quoted price is the only amount the seller receives for the animal.

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