An Evaluation of Alternative Hog Pricing Mechanisms for the Ontario Industry - Ontario Pork - Completed Research
Thursday, April 2, 2020
    

Completed Research

Ontario Pork has a call for research proposals once a year. These projects were approved for funding by the board on recommendation of the research committee. If you have questions or need further information about the research posted here please contact Cristiane Mesquita at cristiane.mesquita@ontariopork.on.ca.


Completed Research

An Evaluation of Alternative Hog Pricing Mechanisms for the Ontario Industry

Project 11-221 - Researcher: Ken McEwan

Ontario has used a US hog price for a reference to determine our pricing for years and discussion regarding the need to determine a new method has repeatedly surfaced.  In 2012, Researchers at University of Guelph Ridgetown campus evaluated alternatives to the current pricing system based on CME Constructed price (201) generated by the USDA as reference for the Ontario 100% Formula price. Other systems evaluated included CME Group nearby futures price, wholesale prices, Canadian retail prices, profit sharing using gross margin windows, as well as direct adjustments to the Ontario 100% Formula price. Their evaluation criteria included a pricing system that was easy to calculate, trackable historical data and close reflection of actual prices paid for hogs by US processors. The researchers determined that the CME (201) is still the most valid price to use for Ontario price calculations. While other pricing systems were similar to the CME (201) pricing, they were not associated with as many hogs and processor prices as the USDA derived pricing.  This was the deciding factor for the researchers determining that the CME (201) is the most reliable option going forward. 

**It should be noted that this research was done on data from 2006-2011, and evaluations factored in Country of Origin Labelling requirements that existed during the evaluation period. 

The full report prepared for Ontario Pork in 2012 can be found here.

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