Pricing hogs, on the other hand, is a different story—more like the Wild West. Unlike grain, we can’t simply check a packer’s cash bid page. Each producer has a slightly different pricing formula, but most use some combination of daily USDA cash hog prices, a percentage of the cutout, the lean hog index, and other variables. It’s about as clear as mud. And predicting the basis at the time of delivery. That’s more of an art than a science—abstract art at that. That’s where the PK602 Daily Cutout Report comes into play. Many hog producers reference this report as a key part of their pricing formula or as a major component of the lean hog index. But what exactly does it contain? At first glance, the AMS/USDA report can seem overwhelming. It includes a handy price breakdown for each primal cut and the entire carcass, alongside load volume data. Then, it’s followed by ten pages of detailed meat classifications, weights, price ranges, and volumes. Without context, it can be difficult to make sense of it all.
Here are a few key points to keep in mind: The report only includes negotiated meat that falls under mandatory price reporting.
A plant must process at least 100,000 pigs per year to be required to report. Further processed meats (e.g., bacon) do not fall under mandatory reporting. Each line item represents a specific cut and packaged product—any changes to the cut, packaging, or added ingredients place it under a different category. Meat priced under formulas or non-carcass premiums (e.g., breed-specific programs or Prop-12 compliance) appears in a separate report, not the cutout report. Exports do not appear on the report, except for sales to Canada and Mexico, which are included.
In terms of volume, the cutout report captures a larger market snapshot than a cash hog formula, covering 15-20% of daily pork production. However, that’s the total load volume. The sample size impacting each primal value is much smaller. Take bellies, for example: the report lists 29 line items, but only two—Derind Belly 9-13# and Derind Belly 13-17#—actually determine the belly primal value. Despite bellies making up 16% of a pig’s yield, they account for only 2-3% of daily wholesale volume, raising important questions about market share and price discovery. Fortunately, the team at AMS/USDA is always willing to answer questions about the cutout and how it’s calculated. While understanding the report won’t necessarily make risk management easier, it does provide clarity—and that’s an important step toward more informed decision- making.
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