We examine the convergence of lean hog futures and cash prices, focusing on the thinning of negotiated cash markets. Using daily Livestock Mandatory Reporting data from 2001 to 2024, we confirm significant non-convergence between negotiated and futures prices over the past two decades. Regression results show that as the share of negotiated transactions declines, the absolute basis increases, emphasizing the critical role of negotiated markets in ensuring convergence. These findings highlight concerns about the reliability of negotiated prices as a benchmark for contracts and offer valuable insights for price risk management in the hog industry.
