U.S. government shutdown forces Cargill, Smithfield to change hog pricing
By Alyce Hinton
CHICAGO (Reuters) - U.S. meat packers Smithfield Foods Inc 000895.SZ and Cargill Inc CARG.UL said they will change the methods they use to determine what price to pay for hogs on Monday because of the partial U.S. government shutdown.
The companies typically use data from the U.S. Department of Agriculture's Agricultural Marketing Service to determine the cash value for hogs. However, USDA market prices have been suspended due to the government shutdown that began on October 1.
Smithfield, the largest U.S. pork packer, said in a letter to producers on Friday that it will begin using CME Group Inc (CME.O: Quote) data to price hogs. CME owns the Chicago Mercantile Exchange, where livestock contracts are traded.
"We have determined that substituting the daily changes in the Chicago Mercantile Exchange lean hog market close for the day of harvest will most closely approximate changes in the USDA reported price during the period of time until the USDA resumes publishing," Smithfield said in the letter.
"This approach will be valid through October 12, 2013, at which time we will evaluate whether or not to continue with this interim pricing method," the letter said.
U.S. livestock markets are reeling from this week's disruption of USDA data as packers, producers and traders depend on daily slaughter, wholesale pork and beef prices to calculate livestock prices. The reports were suspended, along with thousands of other market reports, when the government shut down.
Earlier this week, Smithfield said it was calculating the price it paid for cash hogs based on USDA market hog prices on September 30 for each day through October 4, but would change its pricing method if the shutdown continued.
Cargill, the third largest U.S. meat processor, told producers in a letter on Friday that it will use price data from private firm Urner Barry to price hogs starting on Monday. Urner Barry is closely followed by livestock packers and traders for its meat prices and data. Continued...