Disney, W. Terry

Duffy, Patricia A.

Hardy, William E., Jr.

English

Research Papers in Economics

SOUTHERN JOURNAL  OF AGRICULTURAL  ECONOMICS  DECEMBER,  1989
A MARKOV  CHAIN ANALYSIS OF PORK FARM SIZE
DISTRIBUTIONS  IN THE SOUTH: REPLY
W. Terry Disney, Patricia A. Duffy, and William E. Hardy, Jr.
Rhodes'  claim,  that  our  analysis  (DDH)  size category. We merely suggest  (p. 63) that
"seems curiously unrelated to the structure of  the  presence  of higher  hog/corn  price ratios
real-world  hog production,"  is based  on two  could  provide the incentive  for grain produc-
criticisms.  First, he  suggests  that  our paper  ers to begin raising hogs as a means of more
suffers  from  an  apparent  lack  of knowledge  profitably  marketing  their  grain.  This  new
about the industry as reflected in the poor use  entry, we hypothesized, would most likely oc-
of data and industry assumptions that are not  cur in  the small  and  medium  size categories.
factual.  Second,  he  argues  that  the  analysis  Discussions with those familiar with pork pro-
hinges  on an  assumption  of the unlikely  per-  duction in the South Atlantic  Census Division
sistence of high hog/corn price ratios. It seems,  will quickly lead one to conclude, however, that
however, that he ignores the major objective  the  trend  is  toward  more  single-enterprise
of our research  effort,  which was to provide  pork farming.
information  on  how  changing  corn prices  af-  Rhodes' second criticism, that hog/corn price
feet the size  structure  of pork farming  in the  ratios of 35  (number of bushels of corn equal
South.  in  value  to  100  pounds  of hog,  live  weight)
The South accounted for 15.1 percent of na-  were unrealistically high and were the reason
tional pork production in 1982. Of this, 9 per-  for our resulting shifting  pork farm  size  dis-
cent  occurred  in  the  South Atlantic  Census  tributions,  is  somewhat  confusing.  Actually,
Division.  In  1982,  Census  data  compiled  by  three  hog/corn price ratios  were used repre-
Disney show that there were 27,277 pork farms  senting  low,  medium,  and high  levels for the
in  the  South Atlantic  Census  Division.  Pro-  hog/corn price ratio. At the time this research
ducers  of less  than  50  market hogs per year  was  originally  conducted,  hog/corn  price  ra-
accounted for  20,826  of those farms.  Another  tios  in  the  upper  thirties  had  not  been  ob-
5,564  farms  produced  less  than  200  market  served.  However,  during September  of 1986,
hogs per year.  This left 673 producers  raising  the hog/corn price ratio was reported at 40.2.
between  200  and  500  market  hogs  per year  The yearly average for 1987 was 33.6 (USDA).
and only 214 producers  selling more than  500  As  DDH  comments  (p.  63),  the  long-term
market hogs per year. Admittedly,  no further  effects  of decreased  corn  prices  on  the  hog/
breakdown of these large producers was made.  corn  price  ratio  are  difficult  to  determine.
However, it should be clear that the size cate-  Therefore,  the range  of hog/corn  price ratios
gories chosen by DDH and reported in Census  was used to allow those interested in the ef-
reports  are  reflective  of the  actual  pork  in-  fects  of  grain  policy  on  pork  farm  size  and
dustry in the South Atlantic Census Division.  structure to determine the direction of change
It  is  expected  that  new  Census  data  will  in the industry,  although  admittedly  holding
show a substantial  increase in the number of  many other variables constant.
extra-large  pork farms.  This will,  in  fact, be
due to a flourish of vertical integration within
the pork industry  along the  East Coast. The
increased  presence  of various forms  of verti-
cal  integration,  therefore,  substantiates
Rhodes'  criticism that  initial entry  into pork
farming is more likely at the larger size cate-
gories.  However,  DDH  does  not  rely  on  an
assumption  of initial  entry  only at  the small
W. Terry  Disney is  a Graduate  Research  Assistant,  Patricia A.  Duffy is  an  Assistant Professor,  and  William  E.  Hardy, Jr., is  a
Professor, Department of Agricultural Economics, Auburn University.
Copyright 1989, Southern Agricultural  Economics Association.
219REFERENCES
Disney,  W.T. "An  Analysis  of Structural  and  Geographic  Shifts in U.S. Pork and Feeder  Beef
Production."  Unpublished M.S. Thesis. Ames, Iowa: Iowa State University, 1985.
Disney,  W.T., P.A. Duffy, and W.E. Hardy.  "A Markov  Chain Analysis of Pork Farm Size Dis-
tributions in the South." So. J. Agr. Econ., 20, 2(1988):57-64.
U.S.  Department  of Agriculture. Agricultural Prices. Washington,  D.C.:  NASS,  Agricultural
Statistics Board.  May,  1988.
U.S. Department of Commerce.  U.S. Census of Agriculture, (various  reportinq  years). Volume I.
Bureau of the Census. Washington, D.C.: Government Printing Office, 1972-85.
220

A MARKOV CHAIN ANALYSIS OF PORK FARM SIZE DISTRIBUTIONS IN THE SOUTH: REPLY

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics