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2a/19

DC BRANCH

F 13
Pederal neserve Bank of Chicago -

•

October 3, 1969

HOGS AND PIGS on farms as of September 1 in the ten
Corn Belt states were estimated at 46 million head-5 percent
fewer than a year earlier, according to a recent Department of
Agriculture survey. This confirms the sharp drop in the spring
farrowings revealed in an earlier survey taken at mid-year, the
accuracy of which was doubted by many observers because of
the very favorable returns to hog producers over the past several months. At that time, farmers were expected to expand
hog production during the second half of 1969; however, the
most recent estimates indicate that farmers have continued to
reduce farrowings through the summer months and have plans
to hold farrowings below last year from September through
November.
Farmers Curtail Farrowings
Winter
Fall
Summer
farrowings
farrowings farrowings
(June-Aug.) (Sept.-Nov.) Dec.-Feb.)
(percent change-liom a year earlier)

•

Illinois
Indiana
Iowa
Wisconsin
10 Corn Belt states

—5
—8
—4
+3
—3

— 3
— 2
— 4
+10
— 1

The continued cutback in production is difficult to explain. Conditions have been favorable for increased hog production for the past several months. Prices of barrows and
gilts at Chicago rose nearly $8 per hundredweight from the beginning of the year to mid-August. Although prices have edged
off from their seasonal high, they are currently, at $26 per
hundredweight, around $6 higher than at this time last year.
While prices of corn (the major feed) have also averaged higher
than the year before during the past several months, the ratio
of hog and corn prices(a rough measure of profitability of pro-saucing hog-s) has risen from around 17 in January to above 21
in August. This compares with average ratios of around 17 for
1968 and with 15 for 1967. Furthermore, by using the futures
markets, hog producers could assure themselves of returns
comparable with those of recent months well into next year.
Corn contracts are trading between $1.15 and $1.26 a bushel
depending on the delivery month, while live hog contracts
range from $24 to around $27 a hundredweight. These prices
indicate a hog-corn ratio of near 20 or above through mid1970. In the past, hog-corn price ratios at this level have typically been followed by substantial increases in farrowings.

•

There have been, of course, sizable changes in hog production over the past several years. Substantially fewer farmers now raise hogs. Only about a third of the farms produced
hogs in 1964—down from around a half in 1959. This decline
has continued, possibly at a faster pace, since 1964. The
booming economy in recent years has afforded many farmers
excellent part-time employment opportunities off the farm
and has caused many smaller livestock producers to switch entirely to grain production which can be more fully mechanized.

Number 1033
Larger hog farmers have invested increasing amounts of capital
in their operations and are, as a result, less able to vary their
production significantly from year to year.
Nevertheless, the lack of response to the currently favorable returns in hog production has been attributed primarily to
disease and failure of sows to breed. Also, many farmers reportedly sold gilts and sows because of the very high prices.
Expanded production is foreseen for early next year.
Sows farrowing from December through February 1970 are
expected to number about 2 percent more than the year before. These pigs, however, generally will not be marketed before mid-1970.
Marketings during the next few months are apt to average well under the previous year. Market hogs weighing over
60 pounds on farms on September 1 appear to number about
7 percent fewer: those weighing less than 60 pounds were
down about 2 percent.
•
Hog Prices Edge Down •

U.S.OEM OfAGRICULTURE

Dollars per cwt.
28
Barrows and gilts at Chicago

NIII

11COMInTIMAI

26

MARY

22 1969
1969 (weekly)

-24

A.3-e faRt.ftECORDS
22
20
1968 (monthly)%
18

SIM
itali1111[1111 1 11 titt[1111111111tillillijihildajyj

Jan.

Mar.

May

July

Sept.

Nov.

Hog prices are likely to continue relatively high well into
next year. Larger supplies of beef and poultry will tend to
hold down pork prices over the next few months—a period
when pork prices are typically under pressure from seasonally
larger pork supplies. But,the seasonal decline in the latter part
of this year is apt to be small because of the fewer marketings
expected and the reduced amount of pork in cold storage.
Storage stocks on September 1 were down about 15 percent
from last year.
Roby L. Sloan
•
Agricultural Economist

FARM BUSINESS CONDITIONS

1968

196,
ITEMS

• August

PRICES:
Received by formers (1957.59=100).
Paid by farmers (1957-59=100)....
Parity price ratio (1910-14=100)........• • • • • • •
Wholesale, all commodities (1957.59=100) .•..• • • •
Paid by consumers (1957-59=100).........•.• • •
Wheat, No. 2 red winter, Chicago (dol. per bu.).....
Corn, No. 2 yellow, Chicago (dol. per bu.) .....• • • •
Oats, No. 2 white, Chicago (dol. per bu.)..........
Soybeans, No. 1 yellow, Chicago (dol. per bu.)... • •
Hogs, barrows and gilts, Chicago (dol. per cwt.)....
Beef steers, choice grade, Chicago (dol. per cwt.). • •
'Milk, wholesale, U. S. (dol. per cwt.) ............
Butterfat, local markets, U. S, (dol.. per lb.)......
Chickens, local markets, U. S. (dot. per lb.)...... ..
Eggs, local markets, U. S. (dol. per doz.)..• •.• • • •
Milk cows, U. &(dol. per head)...............
4100410 4000,000

0 000000000 41,

Farm labor, U. S. (dol. per week without board)..
Factory labor, U. S. (dol. earned per week) ..• • • • •

115
127
75
113.4
128.7
1.27
1.30
.63
2.61
27.11
30.94
5.37
.69
.16
.36
306

July
117
128
75
113.3
128.2
1.30
1.29
• .64
2.70
26.19
31.49
• 5.21
.69
.17
.38
305

kigust
108
.121
714
108.7
123..9
1.22
1.08
.6o
2.72
20.50
27.92
5.24
.67
.14
.314
277

129.1113.

75.75
129.2g

P RODUCTION:
Industrial, physical volume (1957-59=100) . ..
Farm marketings, physical volume (1957-59=100).

174.3
127

174.6
127

163.9
132

INCOME PAYMENTS:
Total personal income, U. S. (annual rate, 411. of cI61.)
Cash farm income, U. S.1 (annual rate, bil. of dol.) ..

6P
(
.e
.7V(.

751.4
51.1

694.1
45.3

.EMPLOYMENT:
Farm (millions) • • • • • • • • • • • • • • • • • • • • • • • • •
Nonagricultural (millions). .........• • •.• • • • •

4.0
75.7

4.2
75.5

4.1
73.3

130.8
125.0

133.3.
128.2

123.5
123.1

336.0
309.5

334.0
311.1

300.5
317.0

••

•••

•••

FINANCIAL (District member banks):
Demand deposits:
Agricultural banks (1957-59=100).....• • •.• • • •
Nonagricultural banks (1957-59=100)...• • • • • • •.
,
Time deposits:
•••••••
Agricultural banks (1957-59=100)...
Nonagricultural banks (1957-59=100)...• • • •. 4.• • •

Based on estimated monthly income.

111•0111MID

=WOW

121.3,2

PPreliminarY•

Bank of Chicago.
Compiled from official sources by the Research Department, Federal Reserve