Contact: Media Representative 612-204-5261 Date: January 28, 1999 FOR IMMEDIATE RELEASE

Upper Midwest Hog Prices Hit Historic Lows

MINNEAPOLIS—Upper Midwest hog producers saw hog prices drop precipitously in late 1998. In fact, hog prices are nearly the lowest since mid-1965, and, adjusted for inflation, the lowest prices ever in the history of the United States.

"Supply is the key issue in this price trough," says agricultural economist, Ed Lotterman, in the January issue of the fedgazette, a quarterly business and economics newspaper published by the Federal Reserve Bank of Minneapolis. In spite of increases in domestic consumption and foreign exports, pork production is at an all time high, glutting the market and driving prices down.

As hog production has shifted into larger-scale facilities, an increasing proportion of total production involves contractual relationships with feed suppliers or with hog processors. "The low hog prices have raised public policy issues such as the role of confidential contracts between packers and producers on prices in public livestock markets," says Lotterman.

For a complete review of the current hog crisis, including articles on contract pricing and related issues, check the January fedgazette.

As one of the 12 Federal Reserve Banks, the Federal Reserve Bank of Minneapolis contributes to a variety of Federal Reserve System functions, including operation of a nationwide payments system, distribution of the nation’s currency and coin, supervision and regulation of member banks and bank holding companies, and serving as a fiscal agent for the U.S. Treasury. Additionally, the president of Minneapolis Fed serves as a member of the Federal Open Market Committee, the monetary policymaking arm of the Federal Reserve’s Board of Governors. Together with its branch in Helena, Mont., the Minneapolis Fed serves the Ninth Federal Reserve District, which includes Minnesota, Montana, North and South Dakota, 26 counties in northwestern Wisconsin and the Upper Peninsula of Michigan.

-30-