Forecasting Hog Prices Using Elastlcities

When farmers make decisions about how many sows to farrow, how many gilts to keep for breeding, and how many barrows and gilts to market, one of the major considerations is what the price will. be when these animals are ready for market. There are many ways of arriving at these price projections: big statistical models such as economists at universities build, discussions with others in the business and with extension agents, price forecasts provided by USDA or various commodity sources, and the futures market prices for the month closest to the date of sale. These are all useful methods, but they all have their limitations. Another method of forecasting prices is using elasticities. Like the others, this method also has its limitations. It can provide an estimate of what the price will be up to 5 1/2 months in the future using free information readily available to farmers through USDA publications. The purpose of this self-learning unit is to teach a practical application of elasticities to project hog prices using USDA information on past, current, and projected prices, quantities, and income.