Economics of marketing hogs by carcass weight and grade

Abstract

The objectives of this study were: (1) to outline the characteristics of the present system of marketing hogs in the United States; (2) to outline the ways in which the present system of marketing hogs deviates from the Ideal Marketing System1; (3) to investigate the alternative method of marketing hogs by carcass weight and grade and to show by theoretical models whether this system can satisfy the conditions necessary for an Ideal Marketing System; (4) to outline hypotheses that need empirical verification; and (5) to test some of the hypotheses outlined by the theoretical models;Hogs are usually sold in the United States on a live basis. There is little or no sorting or pricing on the basis of quality. The prices paid to producers vary only with the variation in the weight of the live hog;Experimental evidence indicates that under the present live buying system, hog buyers cannot estimate accurately carcass grade and dressing percentage. Therefore, hogs of a given weight are sold near the average price;The pricing mechanism in the market does not pass on to the producer the consumer's desires for quality. This prevents optimum adjustment of production to consumers' demand for quality or optimum combinations of fat and lean cuts;As a result of an inefficient pricing mechanism, productive resources at the farm level are wasted. All animals are discounted the average amount of loss due to fill and physical defects. The individual producer is competitively forced to fill his hog constituting a loss of productive resources. There is no incentive to reduce the losses from fill, bruising and disease because livestock buyers are unable to accurately determine the extent of fill, bruising and disease losses from observation of the live animal;Market news cannot be accurately relayed to the producer because of inaccuracy in live grading methods and live grade standards. Therefore, marketing resources are not used most efficiently and too many resources may be used in moving the hog to market. Because the producer does not know accurately the quality of meat he is producing, he does not know his exact competitive bargaining position;If it is assumed that a perfectly functioning system of marketing hogs by carcass weight and grade is in effect and accurate and acceptable carcass grade standards have been established, then, theoretically, the marketing of hogs by carcass weight and grade would make it possible for the buyers and sellers to determine the true value of the hog carcass. Therefore, the pricing mechanism in the market could express the consumer's desires for quality and quantity to the producer;1An Ideal Marketing System is one that will accomplish the following: (1) determine a consumer's demand for products, (2) determine the consumer's demand for marketing services, (3) provide an effective price mechanism that will reflect to the producer consumers' desires for goods and services, and (4) reduce marketing costs to a minimum.