CONCLUSIONS BASED ON RATIOS AND 



MATHEMATICS OF SUPPLY AND 



DEMAND 



BY MEANS of corn-hog ratios, it is possible to determine with 

 ^great accuracy month by month the production cost of one 

 hundred pounds of hog flesh. The actual price, however, has been 

 quite different from the cost-of-production price, except as an 

 average of long periods of time. This is indicated by the profit 

 and loss chart on page 32, the black areas above and below the 

 zero line indicating the departure of the actual price from the ratio 

 or cost of production price. 



The actual price heretofore has been determined chiefly by the 

 action of supply and demand and not by cost of production. The 

 close agreement between actual price and the supply-and-demand 

 price as based on a formula derived from bank clearings and hog 

 receipts is shown on page 96. In the chart on page 107 are present- 

 ed the cost-of-production price based on ratios and the supply-and- 

 demand price as based on bank clearings and hog receipts. 



The ratio or cost-of-production price is much steadier than the 

 supply-and-demand price. If the farmers could arrange with the 

 packers for a price more nearly representing the cost-of-production 

 or ratio price, it is obvious that the supply of hogs might be con- 

 siderably steadied. Once farmers realize that neither excessive 

 profits nor excessive losses are to be expected in the hog business, 

 they will steady down to producing about the same number of hogs 

 each year, and they will send them to market in a uniform stream, 

 instead of in irregular spurts. 



Of course, there are always uncertainties in the way of weather, 

 disease, etc. Hot, dry weather in July and August may curtail 

 the corn crop and shoot up the price of corn and the cost of pro- 

 ducing hogs. Such hot, dry weather immediately increases the 

 cost of producing hogs. The packers, heretofore, have been either 

 unable or unwilling to pay a price for hogs sufficient to cover the 

 increased cost of production caused by the hot, dry weather, and 

 as a result they have been compelled to pay more than cost of pro- 

 duction a year or so later. Why shouldn't the packers and farm- 

 ers constantly educate the public to pay the cost-of-production 

 price? Tell the public that the drouth and high corn prices have 

 increased the cost of producing hogs, and the price must be in- 

 creased to prevent a shortage next year. Why shouldn't the farm- 



