Is trading volume too thin in pork markets?

Negotiating hog prices takes time and costs money. Formula pricing means using a price determined by a mathematical formula. In this case, the price established for a specified market serves as the basis for the formula. To be fair to both buyer and seller, the formula must reflect true market value.

Livestock Mandatory Reporting began in 2001. Back then, nearly all hogs priced with a swine or pork market formula used the national, Iowa/Minnesota or Western Cornbelt negotiated hog price as a base price. Over time, other base prices have also been used for swine or pork market formulas including the CME Lean Hog Index or a pork carcass cutout value. Some of these formulas are hybrids and use both a market for swine and a market for pork in the calculation.

Whichever base price buyers and sellers choose, its market must have enough trading volume to instill confidence among all players that the formula reflects true hog market value.

During 2001–2009 negotiated hog sales averaged 14.2% of the producer-sold hog volume and 10.8% of the total hog volume (which includes producer-sold, packer-sold and packer-owned hogs). Even back then, growing variance within the negotiated hog price required more volume to maintain confidence in pricing precision. Unfortunately, since then, negotiated trading volume has gone in the other direction. So far in 2026, only 1.2% of producer-sold hogs and 0.6% of all hogs under Livestock Mandatory Reporting have been negotiated (Figure 1). Surely, this has led to both producers and packers steadily losing confidence in the usefulness of negotiated hog prices as a base price mechanism for formula pricing hogs.

Using a carcass cutout value for a hog base price has gained traction
The addition of wholesale pork volumes and prices to Livestock Mandatory Reporting in 2013 provided more dependable and consistent data for USDA’s Agricultural Marketing Service to use in calculating an estimated pork carcass cutout. As a result of the improved data, packers and producers began using the cutout value for determining a base price for a growing share of swine or pork market formula priced hogs. The number and exact share of transactions utilizing the pork carcass cutout value, however, is not known since both swine-price and pork-price formulas are lumped together in a category in USDA reports. 

Collectively, swine or pork market formula sales have comprised 53.4% of all producer-sold hog sales and 28.0% of all hog sales so far in 2026. Negotiated, swine or pork market formula and negotiated formula sales are used in the calculation of the CME Lean Hog Index.