FACTOES AFFECTING THE PRICE OF HOGS 
27 
This figure shows the actual price of hogs each month during the 
period, and an estimated price computed from these four factors, 
using data available at least six months earlier. It is evident that 
the price estimated from the earlier data comes very close to the 
actual price; it includes about 88 per cent of the variation in the 
monthly averages of the actual prices. Considering only the general 
movement of both the actual and estimated prices, the relation is 
even closer, the smoothed estimated price including 94 per cent of 
the variation of the smoothed actual price. This shows that during 
the pre-war period the monthly average of hog prices could have been 
forecasted six months in advance with a very high degree of accuracy. 
These four factors, three indicating what changes may be expected 
in supply, and one indicating what changes may be expected in 
demand, would have given a definite basis for forecasting the price 
■ ACTUAL HOG PRICES AND HOG PRICES ESTIMATED 
BY FORECASTING FORMULA 
100 LBS. 
DOLLARS 
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!903 1904- 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 
Fig. 22. — Actual hog prices and prices estimated by the forecasting formula. The estimated 
prices were computed by a method which used data available six months before the price 
being studied. By this method the trend of prices can be forecasted six months in advance 
of hogs six months in advance. Figure 22 has shown how accurately 
this could have been done during the pre-war period. 
There is a futures market for hog products, where various provisions 
can be bought or sold for delivery at future dates. As w^ould be 
expected, the prices of these "futures" is a better guide to what hog 
prices will be later on than is merely the present price of hogs. Figure 
23 shows the prices of heavy hogs compared with a price estimated 
from the price of lard and short ribs "futures" for five months 
earlier, and with the price estimated from the four factors by the 
mathematical method. It is evident that the "futures" prices 
would not have given anything like so good a forecast of hog prices 
as would the mathematical method. For the period shown, the 
errors in estimating on the basis of the prices of "futures" averaged 
just about twice as great as the errors when the price was estimated 
on the basis of the factors discussed, 
