Price Calculation | Ontario Pork


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Sunday, August 7, 2022
    

Price Calculation

Price Calculation (Updated Sept 2021)


Internal Hyperlinks:

 Mandatory Price Reporting

 Reference Price Calculation Information


Understanding the Mandatory Price Reporting System

Average Price: The average value of the middle 70% of hogs reported.
Low Price: The average value of the bottom 15% of hogs reported.
High Price: The average value of the top 15% of hogs reported.

  • Each of these calculations use all standard and organic hogs, with futures sold hogs excluded;
  • Prices calculated over each applicable animal  (i.e. low 15% is the average price of the lowest 15% of all hogs);
  • Three categories of hogs are reported (low 15%, middle 70%, high 15%) including base price, all premiums and discounts applied; 
  • Weekly implied premium and average yield have been added to the information reported.

Price are reported as $/ckg Total Value DW F.O.B. Yard.  (Dollars per hundred kilograms Dressed Weight Total Value Freight on Board Yard)

These prices differ from traditional 100 index base prices such as the 100% formula price. The total value prices include all index premiums and other premiums (such as delivery, loin depth, feeding program etc.)

For Example:


(1) A 105kg hog with a $175/ckg base price, a 110 index, and no other premiums would be reported as $192.50/ckg DW Total Value. (175 * 1.10 = 192.50)

(2) A 105kg hog with a $175/ckg base price, a 110 index, and a $2/hog Sunday night premium would be reported as $194.40/ckg DW Total Vale. ((175 * 1.10 * 1.05) +2) / 1.05 = 194.40


Total Volume of Ontario Hogs Sold: The total number of hogs sold by Ontario producers, including all hogs sold in province and out of province.

Volume of Hogs Included in Price Calculations: The total number of hogs included in price calculations. Futures based hogs are excluded from this number. 

Weekly Implied Premium: The implied weekly premium is reported as $/ckg DW. This is the difference between the average price (i.e. total value) and the average 100% formula price for the same week.  The implied premium would account for adjustments in the base price, and all premiums and discounts (i.e. index, delivery time, loin depth, feeding program, etc.).

Weekly Average Yield: This is also referred to as the dressing percentage and is calculated using fat and muscle measurements.

 


Reference Price

Reference Price Calculation Information

>The USDA publishes the National Daily Direct Hog Prior Day Report – Slaughtered Swine (201) each day. Ontario Pork calculates and publishes the CME Constructed 201 Price using the Producer Sold Negotiated, Swine or Pork Market Formula and Negotiated Formula Prices. Ontario Pork named this price series the CME Constructed 201 Price because it uses similar methodology to the Chicago Mercantile Exchange cash index price, and the data is taken from the USDA’s LM_HG201 report. The calculation can be expressed as follows: 

Updated CME Constructed Price Formula

CME Constructed 201 Price = (Producer Sold Negotiated Hogs (Head Count * Average Net Price * Average Carcass Weight) + Producer Sold Swine or Pork Market Formula hogs (Head Count * Average Net Price * Average Carcass Weight)+Negotiated Formula(Head Count * Average Net Price * Average Carcass Weight)) divided by (Producer Sold Negotiated Hogs (Head Count * Average Carcass Weight) + Producer Sold Swine or Pork Market Formula hogs (Head Count * Average Carcass Weight)+Negotiated Formula (Head Count * Average Carcass Weight))

For example, on June 18, 2021:
Chart 

 

CME Constructed 201 Price = (( 5,888 * 122.53 * 199.41 ) + ( 127,710 * 119.89 * 212.08 ) + (1,945 * 126.39 * 217.85 )) / (( 5,888 * 199.41 ) + ( 127,710 * 212.08 ) + ( 1,945 * 217.85 )) = $120.09 (US/cwt)


This will be substituted into Ontario Pork’s 100% Formula

CME Constructed 201 Price
subtract US $0.56/cwt adjustment factor
multiplied by  U.S dressing percentage 0.74
multiplied by  Metric conversion 2.2046
multiplied by  Exchange rate (Bank of Canada daily average)
divided by Ontario dressing percentage 0.80
divided by 1.1195 divisor
100% Formula Price ( C$/ckg DW) 100 index

EXAMPLE: If 201 Constructed = $85.00/cwt and Exchange Rate = 1.2250 then ( $85.00 – 0.56 ) * 0.74 * 2.2046 * 1.2250 / 0.80 / 1.1195 = $188.42 per ckg 100 index