1 / 65

PROCESS OF PRICE DETERMINATION

PROCESS OF PRICE DETERMINATION. PRICE CHANGES OVER TIME. PERISHABLE AND NON- PERISHABLE CROPS WHAT DOES THE SUPPLY CURVE LOOK LIKE?. PERISHABLE CROP. S. P. D. Q. SELL OR SMELL. NON PERISHABLE CROP. S. P. D. Q. CYCLES PRICE PATTERNS THAT REPEAT OVER SEVERAL YEARS.

katelynn-victory
Download Presentation

PROCESS OF PRICE DETERMINATION

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. PROCESS OF PRICE DETERMINATION PRICE CHANGES OVER TIME

  2. PERISHABLE AND NON- PERISHABLE CROPS WHAT DOES THE SUPPLY CURVE LOOK LIKE?

  3. PERISHABLE CROP S P D Q SELL OR SMELL

  4. NON PERISHABLE CROP S P D Q

  5. CYCLES PRICE PATTERNS THAT REPEAT OVER SEVERAL YEARS

  6. AGRICULTURAL PRICE CYCLES PRICE/ PRODUCTION PRODUCTION PRICE TIME

  7. BIOLOGICAL LAG PRODUCERS REACT TO ECONOMIC INFORMATION TODAY -- PRODUCTION DOES NOT TAKE PLACE UNTIL SOME TIME IN THE FUTURE.

  8. Production Lags Due to Biological Lags Swine Slaughter 5-6 Months Pig Born 3.75 months Slaughter Gilt Bred 5-6 months 7-8 months Pig Born Pig Born 3.75 months Gilt Bred 18 months 7-8 months Pig Born

  9. PRODUCERS BECOME OPTIMISTIC ABOUT THEIR INDUSTRY AND THEN BECOME PESSIMISTIC.

  10. OPTIMISM BRINGS ABOUT AN EXPANSION OR ACCUMULATION IN THE LIVESTOCK HERD -- PESSIMISM BRINGS ABOUT A REDUCTION OR LIQUIDATION IN THE HERD.

  11. 1) HIGH PRICES ->INCREASE IN BREEDING STOCK -> HIGHER PRICES 2) MORE BREEDING STOCK -> MORE MARKET ANIMALS -> LOWER PRICES

  12. 3) LOWER PRICES -> REDUCTION IN BREEDING STOCK -> LOWER PRICES 4) LOWER BREEDING STOCK -> MEANS FEWER MARKET ANIMALS -> HIGHER PRICES

  13. COBWEB MODEL 1) QUANTITY TODAY = f( PRICE IN THE PAST) 2) QUANTITY SUPPLIED = QUANTITY DEMANDED 3) PRICE TODAY = f(QUANTITY SUPPLIED (DEMANDED) TODAY)

  14. COBWEB MODEL 1) QUANTITY TODAY = f( PRICE IN THE PAST) example: the price of hogs today will impact the quantity of pork coming to market a year from now 2) QUANTITY SUPPLIED = QUANTITY DEMANDED 3) PRICE TODAY = f(QUANTITY SUPPLIED (DEMANDED) TODAY)

  15. COBWEB MODEL 1) QUANTITY TODAY = f( PRICE IN THE PAST) 2) QUANTITY SUPPLIED = QUANTITY DEMANDED (this means that the product is not stored) 3) PRICE TODAY = f(QUANTITY SUPPLIED (DEMANDED) TODAY)

  16. COBWEB MODEL 1) QUANTITY TODAY = f( PRICE IN THE PAST) 2) QUANTITY SUPPLIED = QUANTITY DEMANDED • PRICE TODAY = f(QUANTITY SUPPLIED (DEMANDED) TODAY) What comes to market today must be cleared today.

  17. The Cobweb Theorem D S Expansion P Hi Falling Prices Rising Prices P Lo Contraction Q Lo Q Hi

  18. EXOGENOUS FACTORS THAT CAN EFFECT A LIVESTOCK CYCLE

  19. COST ---- FEED COST --- PRICE OF CORN

  20. HOG/CORN RATIO PRICE OF HOGS PER HUNDRED WEIGHT/PRICE OF CORN PER BUSHEL

  21. PRICE OF HOGS = $45/CWT PRICE OF CORN = $4.00/BU 45/4 = 11.25 HOG/CORN RATIO

  22. WHAT IS A PROFITABLE HOG/CORN RATIO? USDA SAYS ABOUT 15/1

  23. What is today’s hog/corn ratio?

  24. What is today’s hog/corn ratio?December Corn = 4.66/buDecember Lean Hogs = $62.50/cwt

  25. What is today’s hog/corn ratio?Dec Corn = $4.66/buDec Lean Hogs = $62.50/cwtLean Hogs to Live Hogs .74$62.50 * .74 = $46.2546.25/4.66= 10 to 1

  26. SEASONAL PRICE VARIATION A PRICE PATTERN THAT TAKES PLACE DURING A 12 MONTH PERIOD OF TIME

  27. SEASONAL PRICE PATTERNS A PATTERN OF PRICES THAT REPEAT EACH YEAR

  28. SEASONAL PRICE VARIATION A PRICE PATTERN THAT TAKES PLACE DURING A 12 MONTH PERIOD OF TIME

  29. CAN BE CAUSED BY:

  30. SEASONALITY OF SUPPLY SEASONALITY OF DEMAND OR COMBINATION OF BOTH

  31. (Monthly Price/Annual Average Price)*100 (53.09/51.30) * 100 = 103.5

  32. PRICES AT VARYING STAGES OF THE MARKET CHANNEL

  33. One bushel of wheat = 60 lbs42 lbs of flour from a bushelWheat price = $5/bu$ .12/lb of flour at farm levelA one pound loaf a bread takes .85/lbs of flourFarm value in a loaf of bread is about $ .10Price of bread = $2.00/loaf5% goes to farmer

  34. PRICES AT VARYING STAGES OF THE MARKET CHANNEL HOW ARE PRICES RELATED: LIVE CATTLE PRICE WHOLESALE BEEF RETAIL CUTS

More Related