Reading the local paper this morning, I stumbled across an article about predictions in the pork market from the 2008 Central Indiana Pork Conference (welcome to the Midwest!). Had you been able to attend you could have listened to sessions on "air quality in swine production systems, reproductive inefficiencies and failures and how to incorporate dry distillers grains."
One quote in the article from an agricultural economist perplexed me: "large pork supplies may result from the lowest pork prices we've seen in five years." Anybody else share my confusion? Low prices should lead to supply reductions, not supply increases. Perhaps it's a misquote. Any pork experts out there?
I think it's a very short-run vs. longer-run issue. The lower prices do lead, over time, to a reduction in quantity supplied. But how do you get there? You have to get rid of your breeding stock. So, in the very short-run, hog farmers sell down the stock of breeding animals (both male and female) to get to the new, smaller breeding population.
ReplyDeleteI think doc is right. I know that this phenomenon has lead to "cycles" in beef prices of about 12 years--prices go up so cattlemen keep more cows as breeding stock, and then when the bubble bursts and prices start declining, they slaughter more cattle.
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