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January 5, 2017
In an effort to provide viable price discovery data for use by all parties involved in the production, processing, selling and purchasing of poultry products, the Georgia Department of Agriculture (GDA) introduced this week the new Georgia Premium Poultry Price Index (GPPPI). GDA recently announced it would be introducing a new pricing tool after the validity of the old Georgia Dock Price Index came into question and the agency had to suspend it.
“As the poultry industry has evolved and adapted to changing production techniques, buying practices and a general increase in demand for the product, the GDA must do the same,” the state agency said on its website. “The GPPPI will include a series of producer price indexes meant to measure the aggregate change in the price of poultry sold on contract over three periods of time. In conjunction, the GDA will report a percent change of sales volume for premium poultry on contract to indicate the weekly change in demand.”
Utilizing the methodology behind the Fisher's Ideal Price Index formula, three producer price indexes will be reported measuring changes in prices at one month, six month and twelve month base periods. Operating under a voluntary reporting structure, GDA said poultry producers will submit every Tuesday information representative of poultry processed in Georgia and sold on contract during the prior week.
GDA said the required information will incorporate a complete list of quantities in pounds and price in cents of all sales of poultry on contract for the prior week. This information will produce a weighted geometric mean price and a total volume of pounds sold. The weighted geometric mean price and total sale volume collected from each company will be used to calculate the three price indexes to be reported each Wednesday. The indexes will measure the aggregate change in prices over each of the prescribed periods.
“By measuring the change in price rather than the price itself, the model is able to reflect a greater variability of products. The model measures the proportional change in price and combines that with the proportional change in price of all other companies resulting in an accurate reflection of the change in poultry prices over the given periods of time.”
The reported information will rely on a set number of commonly produced products; examples include whole bird, boneless skinless breast, bone in breast, wings and leg quarters among others, further processed products such as marinated product should not be included. By limiting the reporting specifically to products that are chicken only, the indexes will not be impacted by increases and decreases in input prices that are not directly related to the production of poultry, GDA noted.
All data provided will be subject to verification through a random review, done through a prescribed process that will confirm submitted prices and quantities with the buyers. All formulas and forms utilized in the calculation of the price indexes will be open source and available to all parties to allow for the opportunity for any individual or company to track their own price indexes in relation to the industry aggregate index. However, GDA said company specific proprietary information will not be available to the public.
“GPPPI provides a useful tool for the poultry marketplace and removes any independent discretion on the reported price for poultry.”
According to GDA, the model is designed to allow producers, processors, sellers and buyers the opportunity to track their specific products and how those products are priced in relation to the industry aggregate index. This will provide the ability for price discovery at any level of the supply chain, for all parties, and will offer a comprehensive view into the price trends of poultry currently in the marketplace, a tool for setting a benchmark price for premium poultry contracts and a viable solution for price discovery for buyers and sellers alike, GDA said.
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