Ag Policy Blog

NPPC, Farm Bureau Praise New CME Pork Cutout Contract

Jerry Hagstrom
By  Jerry Hagstrom , DTN Political Correspondent
CME Group announced news futures and options contracts based on the pork carcass cutout, an estimate of the value of a 53-54% lean, 205 lb. hog carcass using wholesale prices that are paid for sub-primal pork cuts. The contract begins November 9. (DTN file photo)

Last week, CME Group announced news futures and options contracts based on the pork carcass cutout, an estimate of the value of a 53-54% lean, 205 lb. hog carcass using wholesale prices that are paid for sub-primal pork cuts.

The contract will be available November 9 pending all relevant regulatory review periods, the CME Group said.

“As the market has evolved, our customers continue to look for new tools to manage the price risk associated with hog and pork production,” said Tim Andriesen, CME Group managing director of agricultural products.

“The pork cutout futures and options are complementary to our lean hog contracts and will provide clients with the ability to manage risk and discover price from the hog all the way to the meat case.”

CME explained, “Hogs are increasingly bought and sold in the physical market based on a formula which uses the cutout. The pork cutout reflects the approximate value of a hog calculated using the prices paid for wholesale cuts of pork. The values, or cuts, used to calculate the pork cutout include the loin, butt, picnic, rib, ham and belly. The new contracts reflect the price of the wholesale product after processing.”

USDA also published an eight-page primer on the pork carcass cutout as well.

“The National Pork Producers Council welcomes the introduction of the new pork cutout trading vehicle,” said NPPC President Howard “AV” Roth, a pork producer in Wauzeka, Wis.

“We applaud CME Group for providing another risk management option, in addition to the lean hog contract, and for enhancing market visibility, which is so important to maintaining a highly competitive and innovative pork production system in the United States.”

In an analysis, the American Farm Bureau Federation's Market Intel service said, “With the increasing number of hog transactions utilizing the pork cutout as part of a formula transaction, these contracts have the potential to develop into an important risk management tool for industry participants.”

“The timing of this announcement coincides with a rising pork cutout value and offers an opportunity to revisit what exactly the pork cutout is and how it is calculated.”

-USDA Agricultural Marketing Service — A User's Guide to USDA's Pork Carcass Cutout https://www.ams.usda.gov/…

-American Farm Bureau Federation Market Intel — CME Introduces Pork Cutout Contract Amid Strengthening Pork Market

https://www.fb.org/…

National Milk Puts Pressure on FDA to 'Enforce' Dairy Labeling Standards

National Milk Producers Federation President and CEO Jim Mulhern today wrote Food and Drug Administration Commissioner Stephen Hahn that he should act soon on his promise to support “clear, transparent, and understandable labeling for the American people” on dairy products.

In an open letter published on the NMPF website, Mulhern wrote Hahn that he has noticed “FDA has been getting more active on topics beyond COVID-19” and reminded him that he had promised to Sen. Tammy Baldwin, D-Wis., at his confirmation hearing to work on the the issue of dairy labeling standards.

NMPF, which represents dairy farmers, says that FDA should not allow food companies to use the word “milk” on plant-based beverages.

“We had been very hopeful, based on your pledge, that this would be the year this problem could finally be solved. Since it's late in 2020 — and who knows what the next few months might be like? — we thought we should check in,” Mulhern wrote.

National Milk Producers Federation — Dairy Defined: An Open Letter to FDA Commissioner Dr. Stephen Hahn

https://www.nmpf.org/…

Jerry Hagstrom can be reached at jhagstrom@nationaljournal.com

Follow him on Twitter @hagstromreport

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