Economic Dynamics of the German Hog-Price Cycle

Ernst Berg and Ray Huffaker

International Journal on Food System Dynamics, 2015, vol. 06, issue 2, 17

Abstract: We investigated the economic dynamics of the German hog-price cycle with an innovative ‘diagnostic’ modeling approach. Hog-price cycles are conventionally modeled stochastically—most recently as randomly-shifting sinusoidal oscillations. Alternatively, we applied Nonlinear Time Series analysis to empirically reconstruct a deterministic, low-dimensional, and nonlinear attractor from observed hog prices. We next formulated a structural (explanatory) model of the pork industry to synthesize the empirical hog-price attractor. Model simulations demonstrate that low price-elasticity of demand contributes to aperiodic price cycling – a well know result – and further reveal two other important driving factors: investment irreversibility (caused by high specificity of technology), and liquidity-driven investment behavior of German farmers.

Keywords: Agribusiness; Agricultural Finance; Demand and Price Analysis (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ijofsd:208872

DOI: 10.22004/ag.econ.208872

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