What European Cars and U.S. Pigs Have in Common

Recently I spent a week in London and everywhere I went I noticed how cars were getting smaller and smaller as Londoners faced the skyrocketing cost of fuel. The typical public service worker in London makes about 26k (pound sterling) and the typical private sector worker makes about 35k (pound sterling). They buy their gasoline by the liter and it costs about 4.5 pound sterling a gallon. As I have mentioned, if you are a tourist from the U.S. that's about $9/gallon if you rent a car.

There were a lot of very strange looking conveyances which I suppose classify as cars including the so-called Smart Car. You can check one of these out at www.smartcarpictures.com.

The reason these things are beginning to proliferate is of course due to the high cost of gas. Some of the models I have been playing with suggest to me that we may be on the verge of rethinking pig flows and the optimal number of W-F or finishing spaces we will need in the future. As the relationship between feed cost (gas) and pig prices (cars) change, the optimal size of the finished animal keeps shrinking. My models suggest that more turns and lower weights are in the offing.

This is preliminary but when average feed costs in the W-F phase approach $300/ton or more and carcass prices are in the mid $70s, optimal turns increase to close to 2.4 or more for a wean to finish building with average weights falling into the 240s. This of course depends on a lot of things like the variation in marketings you produce, the packer matrix penalty for that lower end tail of your marketings and whether or not the pass-through arrives as is forecasted by the June 2009 lean hog futures. When the pass-through is complete, we will still not likely return to pre-ethanol market weights for pigs as the change in the relationship between feed cost and market prices will have fundamentally changed.

Get ready for smaller and more expensive cuts on the BBQ just like the Europeans. Don't worry though, those smaller cuts will arrive just in time to fit nicely behind the seat of your new Smart Car but don't count on getting a bag of briquettes on the same shopping trip.