Latest posts

Fascination with pigs, pigs to art.

I am in Seattle for GnomeDex (all about blogging and politics). While walking around I found pigs here and there, painted, modified, and on display. Apparently, pigs are on parade this summer in Seattle.

What is interesting is the way we (people) humanize pigs. Is this done because this allows us to deal with pigs, not to think about how they live or where they might end up? Thoughts about pigs and how we live them appreciated.

There's No Such Thing as Reducing Risk...You Can Only Transfer It To Someone Else

I was speaking with a fellow economist today and he reminded me of something he has said for a long time. "You can never get rid of risk." Yes, you can transfer it to others, hedge it (which is the same thing), mitigate it with a portfolio solution etc. but SOMEBODY still is bearing it.

This is a very important basic lesson that is playing itself out in the liquidity crisis which is beginning to make itself apparent in the mortgage markets. In short, when someone takes out a home mortgage, the money is supplied by banks who then sell the mortgages, usually with a guarantee provided by the government, to the secondary market.

Dependence on Foreign Oil or Foreign Food?

 

There is a well established saying that capital follows opportunity. One has to wonder where the smart capital of the future is thinking about traveling to as the environment for food production in United States becomes increasingly politicized. Particularly, what are the economic and personal consequences of dependence on foreign sources of the main foodstuffs consumed by people in this country?

The United States has done an excellent job of both preventing and containing the outbreaks of "export stopping" diseases, especially in animals. This is vital if exports are expected to continue to rise as a percentage of total production. A quick look across the pond to the United Kingdom brings back the economic, political and animal welfare consequences of an outbreak of foot and mouth disease. In the most recent outbreak, the bug has been tentatively identified as a strain which is used by one of the vaccine makers in the UK but all of this is preliminary at this point. However, what is not preliminary is that Japan has announced the curtailment of imports of UK pork meat. In 2001 about seven million sheep and cattle were euthanized and burned in the fields. Stringent control of travel, a complete freeze on movements of animals and a big gamble not to use the foot and mouth vaccine proved successful fairly quickly but at a loss in the tens of billions.

Slow Food, Farm Crisis and Let Me Know if Coffee Plants Will Grow Near You.

Let’s switch gears a minute and really go off the wall, since we have been looking at variation and crop prices in the last week or two. Some of you may be aware that there is a growing moment in the country to encourage the production of locally produced food. It is sometimes called the “slow food” movement which is to distinguish it from “fast food” which is almost uniformly condemned by everyone except those who consume it. The movement is more than just the local farmer’s market that may be springing up on your town square every weekend.

I Will Forecast Hog Cost of Production...Don't Ask Me to Forecast Price

So let’s play around a bit with this variation stuff and see how the future cost of production might look for hogs if we forecast it by first forecasting corn and soybean meal prices and then putting those forecasts into a cost of production model to generate a forecast for future carcass prices.

This hog cost forecast was generated assuming that corn would average about $3.50/bushel and that soybean meal would be about $250/ton on average.  Under those circumstances and some stuff I will share in a minute, the average hog cost of production for a 270lb animal would be about $62.50/cwt on a carcass basis.  However, by using the variances and the correlation between the input prices in the forecast model, we can create a forecast not only of the average price but the range over which it is likely to wander and the probability it will reach any one price in the range.