Series 3: 6.1.5.1. Supply: Production

6.1.5.1. Supply: Production

The only time a producer may influence the price of livestock is when it decides to expand or contract the herd. When producers reduce their herds, hog prices can be expected to rise in the future. When producers expand their herds, future hog prices can be expected to decline. Hog and cattle production may be found in two quarterly USDA production reports. The liquidation of cattle can be inferred by observing an increase of female slaughter, though this statistic is a less reliable predictor of the supply of hogs.

Another indicator of a change in the production of hogs is a feed ratio known as the hog/corn ratio. The hog/corn ratio is the price of one hundred pounds of hog (hundredweight, or cwt) divided by the price of a bushel of corn. It is used by farmers to determine the profitability of raising its livestock. Corn is a major feed for livestock in general, and feed is an important cost of production. Many farmers grow corn and raise hogs, giving them the choice of selling their corn as a commodity or using more of it on the farm as feed. If corn is more valuable, the producer will sell the corn and reduce the herd. If livestock is more valuable, she will increase her inventory of livestock and use more corn for feed. Historically, i