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The Problem of the Persistent Hog Price Cycle: A Chaotic Solution

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  • Marcus A. Streips

Abstract

A persistent hog-corn price ratio has been known to exist since the early 1930s and many attempts have been made since then to model its dynamics. That these models have been ineffectual as forecasting tools is apparent by the fact that the hog cycle has persisted to this day. In this paper I propose that increased forecasting accuracy can be obtained by adjusting traditional forecasting models so that they account for deterministic, nonlinear processes. With improved forecasts, the costs of countercyclical production will decrease, dampening and perhaps even eliminating the cycle. The chaotic dynamics of the hog-corn price cycle is confirmed, and chaotic models of this system are developed. The analysis provides the framework for developing a function to forecast the dynamics of the hog-corn price ratio.

Suggested Citation

  • Marcus A. Streips, 1995. "The Problem of the Persistent Hog Price Cycle: A Chaotic Solution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(5), pages 1397-1403.
    • Handle: RePEc:oup:ajagec:v:77:y:1995:i:5:p:1397-1403.
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    File URL: http://hdl.handle.net/10.2307/1243377
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    Cited by:

    1. Berg, Ernst & Huffaker, Ray, 2014. "What drives the German hog price cyle? Diagnostic modelling of a nonlinear dynamic system," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182822, European Association of Agricultural Economists.
    2. Berg, Ernst & Huffaker, Ray, 2015. "Economic Dynamics of the German Hog-Price Cycle," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 6(2), pages 1-17, July.
    3. Holst, Carsten & von Cramon-Taubadel, Stephan, 2012. "International Synchronisation of the Pork Cycle," Acta Oeconomica et Informatica, Faculty of Economics and Management, Slovak Agricultural University in Nitra (FEM SPU), vol. 15(1), pages 1-6, March.
    4. Marisa Faggini, 2011. "Chaotic Time Series Analysis in Economics: Balance and Perspectives," Working papers 25, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    5. Berg, Ernst & Huffaker, Ray, 2015. "Explaining the German hog price cycle: A nonlinear dynamics approach," 2015 International European Forum (144th EAAE Seminar), February 9-13, 2015, Innsbruck-Igls, Austria 206210, International European Forum on System Dynamics and Innovation in Food Networks.
    6. Anning Wei & Raymond M. Leuthold, 1998. "Long Agricultural Futures Prices: ARCH, Long Memory, or Chaos Processes?," Finance 9805001, University Library of Munich, Germany.

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