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PPIC/RAC – Spring 2011

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

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  1. PPIC/RAC – Spring 2011 Wholesale Pork Cuts - Mandatory Price Reporting

  2. 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

  3. 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

  4. 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

  5. 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”

  6. 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

  7. 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

  8. 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

  9. 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

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