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PPIC/RAC – Spring 2011. Wholesale Pork Cuts - Mandatory Price Reporting . Why, How, What, etc. Only 3-5% of pork is reported – cutout? MPR for pork was added when MPR was reauthorized in 2010 Language required Negotiated Rulemaking Not often used by USDA

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ppic rac spring 2011

PPIC/RAC – Spring 2011

Wholesale Pork Cuts - Mandatory Price Reporting

why how what etc
Why, How, What, etc
  • Only 3-5% of pork is reported – cutout?
  • MPR for pork was added when MPR was reauthorized in 2010
  • Language required Negotiated Rulemaking
    • Not often used by USDA
    • Involves affected parties in writing the Proposed Rule
  • Committee representing various groups
    • 12 members including NPPC, AMI, NAMP, GMA and FMI
process so far
Process so far
  • 2 meetings to date – Last one scheduled for May 10-11
  • Cooperation has been good and consensus has been reached on several items
  • Some key items remain, including
    • FOB plant vs. FOB Omaha
    • Transition period during which both voluntary and mandatory run
    • Offal/variety meats
pork mpr ground rules
Pork MPR Ground Rules

Packers report ALL sales of “wholesale pork”

Packer: 100,000 head or more/year

Not everything “reported” to USDA will be “published” by USDA in a report – wording

Confidentiality rules (3/70/20) will apply since reporting is mandatory

current wholesale pork definition
Current wholesale pork definition
    • "Fresh and frozen primals, sub-primals, cuts fabricated from sub-primals, pork trimmings, pork for processing, pork offal, and variety meats, excluding portion-control cuts, flavored, tray pack, cured, smoked, cooked, ground and diced pork products”
  • Some questioning of including of “pork offal and variety meats”
types of sales and delivery windows
Types of sales and delivery windows
  • 4 categories/windows
    • Negotiated spot (0-14 boxed, 0-10 combos)
    • Forward contract (15-90 boxed, 11-90 combos)
    • Forward contract (90 days and more)
    • Formula marketing agreement
  • NOTE – Day 0 is the production day at the plant
  • Packer-packer sales included, intra-company sales are NOT
several other items have been agreed to
Several other items have been agreed to

Fresh vs. distressed vs. frozen

Domestic, NAFTA, non-NAFTA

A brand does not exclude a product from negotiated spot or put in a separate spec

Any marketing funds will be deducted

Brokerage fees are a sales expense and will not be deducted

Specialty products

Enhanced product

big issue 1 fob omaha vs fob plant
Big Issue 1: FOB Omaha vs. FOB Plant
  • USDA opposes FOB Omaha
    • Does not want to adjust prices
    • Uses current beef system as an example
  • Overwhelming majority of the committee supports FOB Omaha
    • Current prices are FOB Omaha
    • More price stability – removes transport
  • Going to FOB Plant will make 2 BIG shifts
    • Voluntary to mandatory – include all cuts
    • FOB Omaha to FOB Plant
big issue 2 transition overlap period
Big Issue 2: Transition/overlap period
  • Almost unanimous support for 12 months
  • Mandatory running behind the scenes as a “beta” test
    • Work out any bugs (remember beef?)
    • Build 12 months of data to compare
  • PROVIDES RELATIONSHIPS TO ADJUST PRICING AGREEMENTS TO MANDATORY
  • USDA seems resistant – cost is an issue
  • Letter to Craig Morris – not signed by FMI