Thin at the Margin: Negotiated Hog Volumes and Price Sensitivity in an Increasingly Contracted Industry

Joe Parcell, Mackenzie Malson and Glynn Tonsor

No 404531, 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri from Agricultural and Applied Economics Association

Abstract: This research examines whether the economic role of negotiated hog transactions has changed as U.S. hog procurement has shifted toward formula contracts and packer ownership. The premise is that market hog production is largely predetermined in the short run, while many formula-priced and packer-owned hogs are scheduled before the pricing period. As negotiated trade becomes a smaller residual segment, negotiated hog prices may become increasingly sensitive to marginal changes in negotiated volume. Total procurement is decomposed into negotiated, contract/formula, and packer-owned quantities. Thinness is defined as one minus the negotiated share of the procurement total. The full-sample thinness interaction is positive and statistically insignificant, suggesting that a single coefficient over the full sample masks any structural change. In contrast, the thinness interaction is negative in all four subperiods and is large and statistically significant in the 2019-2025 period. The most recent period implies a short-run negotiated price flexibility of approximately -0.32 at mean thinness. These findings support the interpretation that negotiated hog prices have become more sensitive to negotiated volume.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 28
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea26:404531

DOI: 10.22004/ag.econ.404531

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