PACKER PRICES AND THE RATIO 

 METHOD 



THE Chicago packers buy hogs as cheaply as they can and sell 

 the pork as high as they can. Nevertheless, for months at 

 a time they may sell pork products at a loss. Over any long 

 period of time there is a fairly constant ratio between the value of 

 one hundred pounds of live hog flesh and one hundred pounds of 

 lard, ribs or other standard hog products. To simplify matters, 

 and for purposes of illustration, we will consider that standard 

 hog product, dry salt ribs, which makes up about 35 per cent of 

 the live hog. 



As an average of the ten years from 1886 to 1895, dry salt 

 ribs (low-grade bacon) sold for the value of 136 pounds of live 

 hog. During the ten-year period from 1896 to 1905, ribs sold 

 for the value of 137 pounds of live hog. During the ten-year 

 period from 1906 to 1915, they sold for the value of 135 pounds 

 of live hog. But while this ratio is quite constant over any long 

 period of time, it varies considerably according to the season of the 

 year. As an average of the ten-year period of 1907-1916, the 

 ratio was 136 pounds in January, 132 pounds in February, 127 

 pounds in March, 126 pounds in April, 133 pounds in May, 137 

 pounds in June, 137 pounds in July, 137 pounds in August, 135 

 pounds in September, 136 pounds in October, 140 pounds in No- 

 vember, and 139 pounds in December. In April of 1918, hogs 

 averaged about $17.45 per hundredweight. Using the standard 

 ratio for the month of April, of 126 pounds of live hog for one 

 hundred pounds of ribs, we would get as the hog price of ribs 

 $21.97. The actual price was about $23.21, or the packers got 

 for the dry salt ribs in the month of April, 1918, about $1.24 more 

 than the customary ratio. The chart tells the story, extending 

 from 1905 to 1919. The black area above the line might be called 

 packers' profits and the black area below the line packers' losses 

 on the manufacture of ribs. As a matter of fact, the packers' 

 profits in the latter part of 1917 and early in 1918 were probably 

 larger than indicated. This method assumes that the packers' 

 manufacturing charges rise and fall in the same ratio as hog prices 

 rise and fall. In the rough way, over any long period of time, 

 this is approximately true, but it was probably not true in late 

 1917. Hog prices at that time were over 200 per cent of the ten- 



