Photo: dutchboyThe Economist reports that pork prices have plunged 24 percent in the past year, partly because the demand for U.S. pork exports has dropped sharply. I don’t eat pork, so how does this help me?
With a lower price of pork, the quantity demanded will rise, as people shift into this now-cheaper meat. And that will shift the demand curve leftward in related markets, including pork substitutes, such as beef and perhaps even chicken. Since I eat those, I will benefit indirectly from the drop in pork prices.
Furthermore, the drop in pork prices may be a long-run phenomenon, since one reason for it is a set of technological improvements in pig-raising. With lower long-run average costs, prices will remain lower than they were last year for quite a while. That means that my benefits will continue even without any efficiency gains among beef and chicken producers. (Related: sugar prices are way up.)
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The cost of dogs also went down at the pet store.
How much of the drop was seen during the swine flu scare?
You’d benefit more from throwing away religion and its rules and eat the delicious pork.
Food prices in general have fallen significantly, although the food price deflation was delayed due to seasonality. The fact that any particular item, in this case pork, lead that wave doesn’t say all that much.
According to you, Dr. Hammermesh, pork demand went down first, THEN prices went down in response. So you are saying the lower price is going to push demand right back up? Is there no equilibrium? Your logic doesn’t make much sense to me.
# 4, thanks for poiting it out first.
You should try pork, it’s very tasty. A life of not eating pork due to superstitious reasons would be a shame. When I stopped keeping kosher I became a much happier person! It feels good to be free to make your own decisions, like an adult.
…um…
Don’t you remember the other big non-economic news story of the year? Swine flu?
People stopped eating pork because they thought it was carried in the meat. What can I say, the world is full of stupid people.
The leftward shift in the demand curve is temporary and will adjust back to normal, probably in the near future.
So the way to profit is to buy pork futures and capitalize on the demand readjustment.