Presenter: Ezra Butcher

Location: 368A Heady Hall

Title: Uncovered Flexibility in the Pork Supply Chain: Evidence from the Feeder Pig Market

Abstract: Analysis of feeder and early weaned pig markets, important segments in pork production, is nearly non-existent. As the industry has integrated, pig markets have become residual markets. They provide price discovery in normal conditions and help the pork supply chain quickly adapt in times of disruption. Using the National Direct Delivered Feeder Pig report, published by the U.S. Department of Agriculture Agricultural Marketing Service, we derive and estimate a structural econometric model relating demand and supply for market hogs, feeder pigs, and early weaned pigs. Results indicate that hog and pig markets are most sensitive to hog processing plant utilization relative to capacity and that this sensitivity has increased compared to prior estimates. Hog and pig production decisions are influenced by market hog prices, wholesale pork demand, feed prices, herd management, and disease prevalence. Estimates from the econometric model predict how disruptions are transmitted through hog and pig markets. A set of counterfactual scenarios quantify the effects of hog processing capacity, wholesale pork demand, and supply response on hog and pig markets. These results have implications for market participants seeking to manage risk and for policymakers designing laws to strengthen the supply chain.