AN EMPIRICAL INVESTIGATION OF LIVE HOG DEMAND

An inverse live hog demand model was estimated to analyze claims that the live hog own quantity demand flexibility's magnitude has increased in recent years. A second objective of this research was to estimate the impact changes in processing capacity utilization rates have on live hog prices. Iowa - Southern Minnesota barrow and gilt price was modeled as a function of average daily hog slaughter, a processing capacity utilization ratio, an index of processing and marketing costs, a retail demand shift index, pork cold storage stocks, and monthly binary variables. Results indicate that in recent years live hog prices have become more responsive to changes in hog slaughter. Additionally, changes in processing capacity utilization rates, at times, also have a relatively large impact on live hog prices. Finally, when the large live hog price decline that occurred during the fall of 1998 is examined, model results indicate that the accumulation of large pork cold storage stocks, the sharp increase in processor's capacity utilization rates, an increase in average dressed weight, and the increase in average daily hog slaughter all had a large negative effect on live hog prices.