U.S. gov't shutdown forces Cargill, Smithfield to change hog pricing

Reuters

By Alyce Hinton

CHICAGO, Oct 5 (Reuters) - U.S. meat packers SmithfieldFoods Inc and Cargill Inc said they willchange the methods they use to determine what price to pay forhogs on Monday because of the partial U.S. government shutdown.

The companies typically use data from the U.S. Department ofAgriculture's Agricultural Marketing Service to determine thecash value for hogs. However, USDA market prices have beensuspended due to the government shutdown that began on Oct. 1.

Smithfield, the largest U.S. pork packer, said in a letterto producers on Friday that it will begin using CME Group Inc data to price hogs. CME owns the Chicago MercantileExchange, where livestock contracts are traded.

"We have determined that substituting the daily changes inthe Chicago Mercantile Exchange lean hog market close for theday of harvest will most closely approximate changes in the USDAreported price during the period of time until the USDA resumespublishing," Smithfield said in the letter.

"This approach will be valid through October 12, 2013, atwhich time we will evaluate whether or not to continue with thisinterim pricing method," the letter said.

U.S. livestock markets are reeling from this week'sdisruption of USDA data as packers, producers and traders dependon daily slaughter, wholesale pork and beef prices to calculatelivestock prices. The reports were suspended, along withthousands of other market reports, when the government shutdown.

Earlier this week, Smithfield said it was calculating theprice it paid for cash hogs based on USDA market hog prices onSept. 30 for each day through Oct. 4, but would change itspricing method if the shutdown continued.

Cargill, the third largest U.S. meat processor, toldproducers in a letter on Friday that it will use price data fromprivate firm Urner Barry to price hogs starting on Monday. UrnerBarry is closely followed by livestock packers and traders forits meat prices and data.

Cargill said it can not guarantee the accuracy of UrnerBarry's numbers or be held responsible for any errors in them.

"It is uncertain when the government will be able to resumeits normal operations, including issuing daily swine reports,"Cargill said in the letter. "We continue to evaluate othermethods for pricing swine for purchase."

Top U.S. meat packer Tyson Foods > told its hogsuppliers on Thursday that it will use Urner Barry data forpricing starting on Monday.

The shutdown has elevated the profiles of companies likeUrner Barry that sell data similar to that which the governmentnormally provides and boosted their subscriber lists.

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