12 AGRICULTURAL PRICES 



crop short, and as a result temporarily increase the number of 

 hogs marketed. Under such conditions, the packer buyers make 

 no attempt to pay for the hogs the increased price which the higher 

 price of corn would warrant, but instead buy as cheaply as they 

 can, quoting in defense, "supply and demand." 



A business panic may come on, as in October of 1907, and as a 

 result the demand for meats of all kinds may shrink. Corn prices, 

 the cost of producing hogs, may stay up, as was the case in 1907- 

 1908, but hog prices nevertheless are reduced. A study of the 

 hog market for many years past reveals the fact that the imme- 

 diate price-making force is "supply and demand," and that "cost 

 of production" has no influence whatever on prices except in the 

 long swings. 



The supply-and-demand theory of prices is well understood by 

 nearly every one. Supposedly, actual prices at any given moment 

 represent an equilibrium of supply and demand. The next day 

 larger supplies come in, and the demand remains unchanged ; natur- 

 ally the price declines to a point where supply and demand are 

 again equal. There is a presumption in the minds of many people 

 that supply and demand interact with almost mathematical accur- 

 acy to determine prices. In the long run, possibly this is true. 

 The day-by-day price, however, is as much a matter of psychology 

 as mathematics. 



This brings us to a consideration of those more intangible price 

 forces which may be grouped together under the head of strategy. 

 In January and in August of 1919, we had excellent examples of 

 the use of strategy as a price-making force. In both months, cer- 

 tain powerful interests worked in conjunction with the newspapers 

 to modify public psychology in the interests of lower prices. Day 

 after day, the lower price bombardment was directed against the 

 farmers by the daily press and the politicians. Prices declined in 

 spite of the fact that the supply was greatly curtailed and the 

 potential demand was as great as ever. In the corn market, re- 

 ceipts were exceedingly light at Chicago during both price raids. 

 Hog receipts in August of 1919, when prices dropped $5 per hun- 

 dredweight, were the smallest of the year. But government offi- 

 cials constantly talked about the vast army supply of bacon. As 

 a matter of fact, the quantity of pork products put on the market 

 by the government was not enough to account for much of a drop 

 in hog prices. But the publicity which went with the government 

 announcements, combined with determined pressure on the specu- 

 lative markets in this country and abroad, sufficed to lower prices 



