Price Discovery And Reporting

Ideally, egg price determination requires an active buyer and seller willing to trade eggs at a negotiated price.[1-3] In order for a transaction to be made, both must be willing to adjust their prices downward (seller) and upward (buyer). Most sales or purchases of eggs are based on an agreed upon purchase price relative to one of several nationally published price reports. Such purchases are passive in nature and do not meet the criteria of an actively negotiated price. The determination of today's egg prices is a complex procedure because it involves so many transactions of so many different products of differing size, quality, and delivery specifications in different regions of the country.

Market reporters must measure the collective nature of such transactions and determine whether the information available is sufficient to justify an overall report that prices are up or down, thereby setting the stage for market adjustments across the nation. There is a fine line between reporting events that have already occurred and reporting a price that will become the base price for the coming few days or weeks.

In the United States, two principal reporting systems survey sales, inventories, and other factors relative to the state of the egg market. These are: 1) Urner Barry Publications Inc., a private company that specializes in the daily reporting of prices for various food products; and 2) The United States Department of Agriculture's (USDA) Agricultural Marketing Service (AMS). Both groups conduct daily interviews of major participants in the egg industry's trading arena. Both verify their findings by obtaining information from both parties in a transaction.

Reported prices, however, are subject to considerable differences in interpretation. They are meant to represent actual sales, but through the years, discounts and other costs have crept into the quote and today, the quotes (for the major sizes within regions) are considered benchmark prices only and the real prices are much below the quotation. The industry, therefore, trades eggs in relation to the quote and not necessarily at the quote.

0 0

Post a comment