Why AgRubicon

Before we can heal, we need to stop shooting ourselves in the foot. For instance, why would anyone sell an open market pig to Tyson with their low base and high premium structure? There is nothing wrong with Tyson's methods of price discovery, but we as producers should NOT be selling to them with the low base that drags down the negotiated market and penalizes everyone – even the person selling to them if they have other pigs indexed to the WCB or other such pricing arrangement – by lowering the posted prints. If Tyson is your best net bid, that is fine...........but sell the pigs to them on a live basis and do not drop the negotiated value.

This diagram shows reduction in negotiated market participation over time.

Part and parcel to the first point, why do we sell any negotiated pigs at all? Take a look at the chart above. See the blue line labeled "negotiated"? It is approaching zero. It is very questionable whether the values represented by the negotiated market is a fair indicator of value on any single day given the thin trade. What would happen if the volume of animals was so low that the USDA could not report negotiated values within their confidentiality rules? If this went on long enough, the only pricing marker we would get would be the 602 values. If we only have the 602 (cutout) reported, the CME index would have to settle to that value in the absence of a negotiated market-derived contribution. In essence, what we currently call the CME lean hog index would become a defacto cutout value. That would certainly impact any basis contracts and "fix" the anomaly that is the cutout contract on the CME.

This diagram shows the reduction in participation to the Hog and Pigs report.

This one may sound goofy, but hear me out. The attached chart shows the response rate has fallen consistently over time. It was only in September of 2024 that the USDA totally biffed on the numbers, indicating that there would be plenty of pigs only to have them not show up in the subsequent months. Producers that drank the USDA Kool-Aid in the September report and hedged their production potentially lost millions in opportunity as prices moved much higher than the USDA projected. The December report of that year also missed the mark, but not to the same magnitude. The errors are not isolated to the pork market. The January WASDE slashed corn yields (hurting the grain farmer in a similar manner) after indicating 180+ yields for most of the late summer. Why do we trust a government agency to regurgitate back to us our own data and do so at the same time that the packer, the funds and every speculator receive the data? That makes no sense. We already have reporting systems within our operations to automatically submit numbers on a monthly basis that can be amalgamated, homogenized and reported back to the source of the data in short order. We just need to coordinate the effort. I am not saying we eliminate the Hogs and Pigs report (Elon may do that by other forces). I am just thinking that we can serve our own interests better than entrusting the government to look out for our best interests.