A little explainer on how meat really gets bought. USDA reports 4 markets. Formula,Forward, Export and Negotiated. Specs are slightly different beef to Pork but conceptually they are the same.

The export and forwards sales are pretty straight forward. They are what they say they are.

The formula trade is a little trickier. Most of that biz is based on USDA weighted ave for some # of days prior to ship date. In some cases there may be a overage charged to the USDA if the item is high demand. I rarer cases some packers may trade a item at a discount formula

The negotiated market is most misunderstood. Most people assume that market is totally spot trade that is actively sold by the packer at negotiated price to spot buyers. That does make up much of the trade.

But there is another component of that trade. That consists of meat that is shipped very consistently by packers to a customer who wants that meat weekly and by a packer who wants the order weekly.

They circumstance vary. Packer may be proud of his product and not want to sell at a average price. Buyer may buy big volume and doesn’t want to pay the average.

They want to do the Bussiness together and they will have a back and forth each week about pricing and they get it done. It gets reported as negotiated and it is but it is not spot.

There is a very large amount of meat traded on these terms.

They other tricky component of the negotiated markets are the orders that are not to ship current week but are inside the shipping window of the negotiated market report. Bought this week ship next most usually.

Those are the most powerful orders that are written of all because they reflect the trend usually. If meat is tight for now buyers will usually pay up in a significant way to get what they want as soon as it is available. It is a power driver of markets.

Last weeks beef market was a extreme example of that dynamic.

I hope that helps you all understand how the meat actually trades and how that trade shows up in the USDA reporting.