> "K +&Q Division of Agricultural Sciences UNIVERSITY OF CALIFORNIA TRANSPORTATION RATES and OTHER PRICING FACTORS AFFECTING the CALIFORNIA SWINE INDUSTRY o JAMES B. HASSLER CALIFORNIA AGRICULTURAL EXPERIMENT STATION BULLETIN 754 K cLdS ■ ■ ■ Since 1940, California has become an increasingly deficit state with regard to hogs and pork products. It now imports nearly 90 per cent of its consumption requirements. Higher transportation rates on hogs and pork products benefit the California producer. Rising rates since 1946 have been to his ad- vantage, and to the disadvantage of the midwestern producer. Consequently, the decline in California hog production has prob- ably not resulted from increased midwestern competition but from local competition by other agricultural enterprises. Because of its deficit position, California's prices on hogs, fresh pork, and cured pork should be higher than comparable midwest- ern prices by amounts equal to the transportation costs involved. A comparison of prices and transportation costs on hogs and pork products from the Midwest shows this to be true. It also shows that fresh pork prices have been higher than expected, especially at San Francisco, and cured pork prices have been slightly high at San Francisco and very depressed at Los Angeles. THE AUTHOR: James B. Hassler is Lecturer in Agricultural Economics and Assistant Agricultural Economist in the Experiment Station and on the Giannini Foundation, Berkeley. JUNE, 1956 ■ : > v -'.. ":■:-■■■ ' Before the end of 1945, transportation costs were relatively cheaper for hogs than for pork products. Since then, costs have been of approximately equal advantage, with a slight shift re- cently toward pork products. The railroads are currently proposing a reduction in meat rates. To re-establish a condition of equal advantage, rates would have to be reduced by about 13 and 21 cents per hundredweight on hogs from Omaha to Los Angeles and San Francisco, respectively. Any arguments for or against maintaining a state of equal ad- vantage should be based on relative costs for alternative transpor- tation services. Indications are that pork products could probably be moved at lower costs than equivalent hog movements. Effect of contemplated rate decreases on California's swine indus- try would be negligible — about 5 cents a hundredweight on cured pork products. (Fresh pork rarely moves by rail.) and Figures IN SUPPORT OF THESE STATEMENTS ARE CONTAINED IN THE TEXT WHICH FOLLOWS. TRANSPORTATION RATES and other pricing factors affecting THE CALIFORNIA SWINE INDUSTRY JAMES B. HASSLER In California, the swine industry, including both farm production and processing, is not a major segment of the agricultural economy. Nevertheless, it is of sufficient importance to warrant pointing out the implications of changes in factors that influ- ence its competitive position. Since a large portion of the commercial farm production of hogs is based on a garbage operation, the profitability of swine feeding is of direct interest to many cities in California. Consequently, changes in the economic advan- tages of producing and processing hogs in California have significance not only to farmers and packers but also to city administrations with respect to garbage-disposal costs. This report will be concerned with two major issues: (1) the relationships and implications to our local industry of absolute and relative transportation costs on live hogs and pork products for shipments to California from midwestern points of supply; and (2) how efficiently the pricing system has been operating in conjunction with the given rate structures of the past. Basic Aggregate Relationships Before the major problems stated racy can be assumed for these estimates above can be developed in detail, it is since the basic information is subject to essential to know the background of con- errors caused by incomplete coverage by sumption, slaughter, local supply of live the collecting agencies. However, it is animals, inshipment of live animals, and believed that the errors are relatively inshipment of pork products for the Cali- sma n in comparison with the magnitudes fornia swine industry. Use of this infor- of the varia bles employed. Consequently, mation will first be limited to an under- &e reladve magnitudes? both within and standing of the state s general deficit i .* i , i r D , . , . . , between the series, can be taken as firm setting and the relative importance and . , r • i i ... r . A it. i evidence oi comparative levels, composition ot its supply. Later, changes . . , , , , . . .i . .ii i j. Annual local slaughter ol hogs origi- m the various time series will be dis- & ° . cussed, and an attempt made to correlate natin S on California farms ma Y be estl " them with transportation costs changes mated from data lssued b ^ the California of the past. Crop and Livestock Reporting Service. Figures 1, 2, and 3 present these basic These figures plus inshipments (which aggregates from three points of view for are assumed to be entirely for immediate the indicated time periods. It should be slaughter) give the estimated total annual mentioned t hat no high degree of accu- hog slaughter for the state. Both sets of 1 Submitted for publication October 14, 1955. data provide information on the levels of [4] farm hog production and pork-packing activity in California and indicate the intrastate and out-of-state levels of supply to the local packers. Direct information on the inshipments of pork products into California is not available, and attempts to secure such data from the industry were unsuccess- ful. Consequently, an indirect estimate of the volume of such inshipments had to be made. Assuming that changes in local inven- tories held by the trade are minor com- pared with the annual flow of pork products into the state, estimated inship- ments may be considered as the difference between annual California consumption and annual local slaughter. In following this approach, it was necessary to esti- mate the volume consumed by applying population estimates for California to the United States per capita consumption estimates for pork. Therefore, the esti- mated pork product inshipments are bal- ance sheet differences. Conversion of product poundages to animal units was on the basis of 56 per cent yield and an average live animal weight of 250 pounds. Figure 1 indicates the deficit position of California hog production and slaugh- ter with respect to consumption. The stability of farm production at around 1,000,000 hogs, from 1940 to 1944, a drop to a level slightly above 750,000 from 1945 to 1952, and a sharp decline in 1953-1954 under the vesicular exan- thema epidemic should be noted. When this information is portrayed in figure 2 on a per capita basis, it shows an almost continuous decline in local production and slaughter up to 1945. The slight in- crease in live hog inshipments per capita more than offsets the per capita produc- tion decline from 1945 to 1952 so that a slight increase in local per capita slaugh- ter is evident. Since hog inshipments and local production both declined in 1953— 1954, per capita slaughter decreased markedly. With per capita consumption Fig. 1. Total Consumption and Supply Components for the California Swine Industry. 6000 5000 N 5? 4000 o & 3000 .2 2000 E 3 000 Supply from inshipments of pork products :i:j:j:j:j:j:j:|:j:j:j (by difference)::::::::::;::::;:::::: 1930 -39 y t Total consump- ion equal to total supply 43 45 47 49 Years [5] Fig. 2. Per Capita Consumption and Supply Components for the California Swine Industry. Per capita consumption equal to per capita supply Fig. 3. Percentage Distribution of Supply of Pork for California Consumption. 100 • ■ *.• • » . m '—m — k—w — w— ■ — ■ _■ _ » — w~ •: Supply from inshipments of pork products :j:j( by difference )j:j: [6] varying around a level of about one-half hog. it is clear that changes in inship- ments of pork products per capita are the inverse of those for local slaughter. Figure 3 expresses the supply compo- nents on a percentage basis with respect to total consumption, and disregards the population aspects of the supply prob- lem. Until 1945, about 28 per cent of local consumption came from California farms. With a declining percentage of supply in the form of live animals shipped in during that period, the supply com- ponent of pork products shipped into the state increased rapidly, reaching 60 per cent of consumption in 1945. For most of the time between 1945 and 1953, the percentages stabilized somewhat, with increases in inshipments of live hogs more than offsetting the decline in the percentage of supply from California farms. Transportation Costs and Interregional Competition This section will not consider all com- modity flows involved in transportation costs and interregional trade, but will center on a single commodity. It must be understood, however, that payment prob- lems arise in trade between areas and that the source of continuing payments requires either bilateral commodity flows, investment flows, or capital and/or nat- ural resource depletion in one or both areas. Although this position might be ignored when considering a single, minor commodity flow, it is very important when considering aggregate trade bal- ances between geographic areas. In the developments which follow, the first consideration will be the absolute level of the transportation rate (cost) on a given commodity and the influences of changes in this rate on industry equilib- rium. Second, it will be assumed that the product can be moved in either a raw or processed state (with a specific yield ratio under processing), and the influ- ence of changes in the relative level of the rates on the two forms will be con- sidered. Absolute level of transportation rates. Assume that an industry is in long-run equilibrium and that a geo- graphic balance exists in the production and consumption of the product involved. This product is "batch" produced as are many of our agricultural products having rather long production periods. In the extreme short run, the supply function is practically perfectly inelastic. In the long run, the supply schedule will be more elastic. These assumptions are reasonable for the United States swine industry. In equilibrium, the industry will be operating under a given transportation cost structure for product movements from relatively surplus to relatively defi- cit areas. We might pose four questions at this point : ( 1 ) What rate level would be necessary to exclude shipments to the relatively deficit region in the extreme short run (a given season) ? (2) What rate level would be necessary to exclude these shipments in the long run? (3) What criteria can be employed in arriv- ing at a "correct" rate level for the prod- uct? (4) What forces would tend to make ineffective the establishment of a "non- economically based" rate level for area discrimination? Figure 4 should assist the reader in following the answers to questions (1) and (2) . Lines labeled d and D are basic demands (static) for market areas 1 and 2, respectively. The short- and long-run supply functions for the two areas are labeled on the figure. All demand and supply functions are assumed to be inde- pendent, that is, movements along any schedule will not cause shifts in any of the remaining schedules. Let us consider the extreme short run in which supplies are fixed at a and I as [7] indicated on the figure. With zero trans- portation costs, the excess demand of 1 that would be potentially available for supply area 2 is given by the line labeled d\ It should be evident that a transporta- tion cost of Px-Pk) would be required in order completely to exclude shipments from 2 to 1 in this short-run setting since a rate of this magnitude would lower d° by the same amount and would present no profitable outlet for suppliers in area 2 relative to the local selling price, p 10 . Figure 4 depicts the industry in short- and long-run equilibrium with a trans- portation rate of p 5 -p 6 . To show this equilibrium, d' was drawn below and parallel to d° by the amount p r -p Q . Then, this excess demand was added to D to secure Z)' facing area 2. With a supply of size /, area 2 would have a price of p 6 , and the supply would be divided into local sales of size g and sales to area 1 of size gl which is equal to af. Price in area 1 would be p. with the local supply of size a. Note that the short- and long-run supply functions cross at levels of p 5 and Fig. 4. Influence of Changes in Transportation Costs on the Short- and Long-run Equilibrium of an Industry. Short-run supply (I) Long-run supply (I) a bldl f c e Quantity demanded or supplied [8] p 6 , respectively, so that the industry is in short- and long-run equilibrium. Now consider an increase in the trans- portation rate and draw d" parallel to and below d° by an amount equal to the new rate level. Next add d" to D to secure D" which intersects the short-run supply for area 2 at a price of p 9 . Area 2 will sell an amount / locally and ship jl to area 1. With jl equal to ae, the price in area 1 will be p 4 . We should note that the price difference p 4 -p 9 is equal to the as- sumed new rate level and that the in- crease in the old rate has caused an in- crease in the price at area 1 of size p 4 - p 5 , a decrease in the price at area 2 of size p Q —p 9 , and a reduction of shipments from 1 to 2 of size gj equal to ef. The re- duction in shipments is identical with the loss of total sales in area 1. It should also be noted that, although the industry is in short-run equilibrium again under the new transportation rate structure, it is not in long-run equilib- rium since at p 4 excess profits are being realized, in area 1, which will be an in- centive for industry expansion there, and at p 9 losses are occurring in area 2, sig- nifying a need for contraction of produc- tion in that area. To establish the long- run equilibrium under the new rate level, d 00 is drawn to show the excess long-run demand of area 1 that would be facing area 2 if no transportation costs existed. Next, d* * is drawn parallel to and below d 00 by an amount equal to the new rate level, and this reduced demand is then added to D to secure D**. The intersec- tion of Z)** and the long-run supply func- tion for area 2 establish the price p. and output k as the equilibrium point in that area. Of this output rate, k, an amount h will be sold locally and hk will be shipped to area 1. This amount hk is equal to bd, so that the price p 3 and out- put b will be the long-run equilibrium point for area 1. We should note that this movement to long-run equilibrium caused a slight rise in the general price level from p 4 to p 3 (equal to the change p 9 to p 7 ). Furthermore, we should observe that a rate of size p 2 ~Ps would be re- quired, in the long run, to eliminate ship- ments from area 2 to area 1. In general, it may be said that a higher rate is re- quired in the short run than in the long run to reduce or exclude shipments from a relatively surplus to a relatively deficit area. Turning to questions (3) and (4), it is apparent that where transportation of a given product is supplied by carriers that simultaneously transport many prod- ucts, it is virtually impossible to impute costs for transporting the specific prod- uct since many of the factor costs are jointly involved. Consequently, to assume that the competitive transportation rate on a product should equal the cost of doing the job of moving the product from point to point is to admit that an estimate of the relevant cost will be essen- tially arbitrary because of the vagueness of what constitutes a correct allocation of joint costs. Furthermore, a carrier that had freedom in setting rates on many commodities would not necessarily be interested in estimating costs on each commodity but more likely would seek that set of rates which would maximize return over total costs. For this reason and because the demand for transporta- tion varies from product to product, it is likely that rates would depart from any arbitrary cost estimates. If all carriers were involved in joint transportation operations, it is possible (even under effective interfirm competition) that marked flexibility in the rate levels could and would result over a period of time even though the basic cost of the factors remained constant and zero long-run profits were realized. This would be pos- sible if large changes occurred in the structure of demand for transportation of the various commodities involved. These conclusions would also hold under partial control of rate making under ICC-hearing processes. [9] The previous paragraph assumed an environment in which all transportation services were supplied by joint product carriers. If only rail transportation were available, such would be the actual situ- ation. However, the expanding trucking industry represents a source of trans- portation services that can, and in many cases does, provide limited-scale trans- portation for a single commodity. This operation can be studied and analyzed to estimate per-unit direct costs for such movements. Under competition between trucking firms, the per-unit rates charged would tend to be equal to per-unit total costs in the long run. (The per-unit total costs would be equal to the per-unit direct costs plus a per-unit allocation of over- head costs. The overhead costs could be allocated on many arbitrary bases, but probably a per-load basis would be most reasonable if empty backhauls were in- frequent.) This conclusion would not be altered by considerations surrounding "round trip" types of trucking opera- tions. Furthermore, at least for move- ments of pork products to the Pacific Coast from the Midwest, the secondary alternative, use of owner-operated or owner-leased trucks by packing plants, would be another pressure tending to establish commercial trucking rates on a par with long-run costs. Carrying the discussion one step fur- ther, it is reasonable that competition be- tween the trucking industry and the rail- roads would tend to make their rates equal on those commodities susceptible to alternative methods of hauling. Other- wise, the one charging the higher rate would lose business rapidly except in areas where the alternative carrier was not available. Obviously, it would be practically use- less to raise rail rates on swine and pork products being shipped into California with the purpose of improving the mar- ket price for the local supply unless trucking rates were also increased. Other- wise, the rail traffic in these products would merely be taken over by the com- mercial trucking firms. Furthermore, with the secondary alternative of owner operation of trucks by packing house firms, the commercial trucking rate could not be above cost for very long periods. It is highly likely that rates set by truck- ing firms on commodities like pork prod- ucts would even be below cost (to dis- courage owner operation of trucks) , with this loss being offset by monopoly rates on commodities for which owner opera- tion of trucking facilities would be an un- economical venture. Products coming from very small-scale firms or having a very short season of supply would fall in the latter category. Relative level of transportation rates. This section is concerned with the relative rates on a raw product and on its processed forms in contrast to rates on a single commodity. Assuming that the conversion percentages between the raw product and its multiple processed forms are known, it is possible to compute the weights of these forms that would be equivalent to an initial weight of the raw product. In the field of transportation, many commodities are grouped under equal rates. The major groupings for the pork industry are fresh, fresh-frozen, and cured. The fresh-frozen rate is a class rate for the railroads and has been high compared with the truck rate for the same group. Truck rates on fresh and fresh-frozen have been practically identi- cal after allowance for tare has been made. The long transit time of fresh pork shipments to California from the Mid- west by rail nearly eliminates that method of shipping this perishable product. In general terms, let Ti, Tf, and T c be the lowest available transportation charges (including service charges and tare allowances) on live hogs, fresh pork, and cured pork, per 100 pounds of each. Let kf and k c be the pounds of fresh and cured pork (rather clearly defined by consumption habits) that result from the processing of 100 pounds of live hog. [10] Then a state of equal advantage with re- spect to transportation charges exists when Ti is equal to k f T f + k c T c . For dis- 100 100 cussion purposes, let the sum of the last two terms be designated as T p . If Ti is greater than T p , we should ex- pect shipments of the processed form to predominate and vice versa if Ti is less than T p . This assumes that the price dif- ferences on the raw and processed forms between the areas concerned are equal, respectively, to their transportation charges. In view of the fact that the prices involved are buying prices of the raw product and selling prices of the proc- essed products for the processing firms, it is necessary to assume that processing costs are equal and are competitively re- flected in prices in both geographic set- tings if the simplified statements are to be valid. We now come to a crucial aspect of this relative rate problem with respect to the swine industry. If it can be assumed that the three-way competition of rail- roads, commercial truckers, and owner- operated trucking by packing houses keeps individual rates on swine and pork products near competitive levels, then, at each point in time (and for rather lengthy periods), there will be a rather fixed ranking of T\ with respect to T p . If there are no significant differences be- tween the costs of processing swine in the Midwest and in California, the smaller value of Ti or T v would indicate the more profitable form for shipments from the Midwest to California. In any event, the movements should and would move in such fashion that the transportation plus processing costs were minimized. Changes in the size of Ti with respect to T p would result primarily from techno- logical changes in transportation meth- ods. For simplicity, "processed products" have been considered as homogeneous commodities. There is evidence that product differentiation of the individual cuts can be achieved between firms — especially on the cured products. These price differentials on such things as hams and bacon can be sizable and vary in their relationships geographically as in- dividual national firms attempt to prac- tice area discrimination to enhance the value of all the pork products they sell. Their gain over other firms by this type of discriminatory marketing would come from the higher gross value of the proc- essed products over the competitive price paid for the hogs by all firms. In other words, if Ti and T p are nearly equal, and price differentials on cuts are not uni- form across firms by areas, it is possible that certain firms would find it profitable to ship live animals (especially if they had established slaughtering plants in the deficit area under a previous rate structure), while other firms would ship processed products with greater advan- tage. Consequently, actual shipments may include both live animals and finished products even when the relative rates in- dicate that the movement in one form is more profitable than in the other. Historical Results — Absolute Rates and Price Differentials This section compares price differences between California and midwestern mar- kets with transportation costs on live hogs and on pork products in order to appraise how efficiently the pricing sys- tem has operated. The primary aim will be to detect any long-period biases that might have occurred. Random deviations from expected price differences are bound to occur because of incomplete in- formation, time requirements for move- ments between areas, and the tendency for shippers and purchasers to continue with the same business contacts rather than shift to alternative outlets and sources. [ii] On live hogs. Figure 5 has been con- structed to show the comparisons stated above as applied to hogs. The midwestern market selected for this analysis was Omaha, with Los Angeles and San Fran- cisco representing California markets. From the basic reported prices, differ- ences between the California prices and the Omaha prices were computed for Good and Choice, 200- to 220-pound hogs. Also, the full transportation costs to the California markets from Omaha were computed from basic freight rates and other service charges. (See Appen- dix table 1. Railroad rates on long-haul shipments of live animals apparently have been lower than any competitive trucking rate since nearly all of the move- ment has been by rail.) Under efficient pricing, price differences would gener- ally be near the level of transportation costs, with some random variation around that level. No large, consistent bias should be apparent. Fig. 5. Comparisons of Hog Price Differentials with Transportation Costs Between Omaha and California Markets.* 2 - Transportation costs, Omaha to San Francisco-^ (-Transportation costs, Omaha to Los Angeles -j Price difference, Omaha- San Francisco-^ \^\ r Price difference, Omaha -Los Angeles 6/24 7/22 1939 12/9 12/30 2 - «. I - a> 5 r> c 3 V a y\^ -~^~~ " 106 "V" ••••• ••• •.. ■ i i i i i i .... ... i i i 1/6 2/3 3/2 3/30 4/27 5/25 6/22 7/20 8/17 9/14 10/12 11/9 12/7 12/28 1940 a. S 2 o o Q L.A. S'" m 106 W C — . S . F v _j i i i i i i J_ 1/4 2/1 3/1 3/29 4/26 5/24 6/21 7/19 1941 8/16 9/13 10/11 11/8 12/6 12/27 * Beginning with 1949, monthly average prices were used for this figure. This averaging process has eliminated a part of the variation, and smaller deviations on the monthly section are not directly com- parable with the deviations on the weekly section. [12] 12/6 12/27 0/9 11/6 12/4 12/25 a. «A o "o Q [13] 0> Q. O Q / i 3 L.A. "X /- S - R 1 2 *•. „ 196 ••• 1.81 pz j ^rr.»f»»* ^^y \ .u?'" t... 1.73 — -_'•- jT 1 " ^^^ i i i I i i i i i i i i M M N 1952 i c 3 w. n 3 14 T3 0) £ 12 c -£ 10 a. 8 10 l 6 o O 4 Price difference, spareribs, San Francisco - Chicago Price difference, loins, San Francisco - Chicago Price difference, spareribs, Los Angeles - Chicago / . / / \ . — .—*• % \ Price difference, loins Transporfation cost difference from 3.28 Des Moines to California / and to Chicago--^ Los Angeles - Chicago _l M M J J 1948 24 22 JZ o» "S 16 § 14 JC 5 12 a. £ 10 o o 8 Q 6 4 2 Spareribs, S.F Loins, S.F. - -. 2.94 _L M M J 1949 [16] -? 14 4) s x» 12 T3 g 10 c 0> Q. t/1 O 8 - o 4 2 - ^ Spareribs, S.F 7 Spareribs, LA .?I2 I 8 £ ^ 6 a> Q. Spareribs, S.F. Loins, S.F. - " .•••*'* \ ..-"""\ Spareribs, LA. A M N a> 5 ■D a> c 3 at a. o Q Loins, S.F. • V ^ Spareribs, S.F. .'"^. S^ssr-an ^>« / ^-Spareribs, ^ «*»'"'* / ***••• L.A. 2.94 M M l_ J 1952 Loins, L.A. N [17] .?I2 | 10 I 8 .- 6 Q. 4 =5 2 Spareribs, S.F •V Spareribs, . LA 2.94 »<-•<« ^• — — "V ^^' V _L M M J J 1953 N i k 14 - 12 / /v / ^-Spareribs, S.F £ I0 - / o» „J #****" /*■ Loins, S.F undred 03 - / / <£ .... s. 6 - •A /£ V- / * ^^ \ / ^^ Spareribs, o o 4 3.11 4/ X ./Sw LA. Loins, L.A.--^ - -i \^r .• •••••••V f t».» ^T .•*/ 2 V \. '••• / 2.97 2.92 — -1 i i i i i i • i i i i i M M J J 1954 perishability risks for movements from the Midwest to California. With this understanding of the price effect of perishability, it is possible to ap- praise the level of price differences shown in figure 6. It can be said that, with a few short-period exceptions, prices in San Francisco have been generally higher than necessary to be consistent with the midwestern price structure. Secondary information secured from the trade sug- gests that United States Department of Agriculture price reports on meats in San Francisco tend to exceed the actual price levels in the market. While this is not proved, it is almost certain that any reasonable bias would not be sufficient to account for the extremely high prices on spareribs at San Francisco. The situation at Los Angeles has been more consistent in pricing fresh pork products relative to the midwestern basic price level. Periods of high price incon- sistency on loins occurred during the first [18] and last three months of 1948, the last quarter of 1950 and 1952, and during the autumn of 1953. It should be pointed out that the periods of depressed prices on loins at Los Angeles, such as during the summer of 1948, offset these high-price periods over time and that the general picture has been one of reasonable geo- graphic price conformity. Sparerib prices at Los Angeles have been rather con- tinuously above what might be consid- ered a reasonable level over midwestern prices and display the general situation (as was true also for San Francisco) of having had larger differentials than loins. This may be explained by the fact that, although spareribs may be even less per- ishable than loins, their handling costs per unit of weight are undoubtedly higher and — more important — their net salvage value in alternative uses after significant deterioration is probably very low in comparison with loins. It is be- lieved that these two points underlie a part of the relatively high price differen- tials on spareribs in California markets. Cured pork products. Cured pork is less perishable than the fresh product. Consequently, its price structure should be more stable and require smaller risk premiums than were evident for fresh loins and spareribs. Aside from the un- usually high bacon price at San Francisco in early 1948 (a continuation from late 1947), a comparison of figure 6 with figure 7 indicates a greater stability in the cured pork price differentials. For bacon and ham, two general state- ments can be made about the pricing con- sistency of California markets in relation- Fig. 7. Comparisons of Cured Pork Price Differentials Between Chicago and California Markets, with Differences in Transportation Costs Based on Des Moines. 14 \ \ 12 - 10 - 8h cr 5 1> TJ C 3 |— x: « 4 a. L. o 2 - 0- -2 -4 Price difference, bacon, San Francisco - Chicago Price difference, ham, San Francisco- Chicago « \ / *. Transportation cost difference • • X* \ from Des Moines ;\ "• to California and to Chigago-^ ; * \ 1 •*'— • \ \ r^^S^ 2.80 '-.N ^ Price difference, bacon,! Los Angeles- Price difference, ham,| Cnica <3° M M J 1948 [19] - 6 .c o> O) 5 TJ . a, 4 La T3 C 3 Q. «o o Q -2 Ham, S.F. ^^ ^ iL^TJ!!lZ. Z^** * -.. 2.80 / / Bacon, S.F. / 1.98 \ m • Ham, LA 2.09 3.19 2.18 1 2.91 s o> 6 fj4 a> Q. O Q -2 \ rS-^^S Ham, S.F. Bacon, S.F. • •••••• • • • • / / / - 6 / ..." v-- — ^* — [20] Ham, S.F. JC o» 3 ■o a> L. T3 C 3 -C k. a> a. en k. o o Q Bacon, S.F. [21] ship to the Midwest. First, the San Fran- cisco prices have been slightly higher than expected but not generally at exor- bitant levels in comparison with Chicago. Rather strong premiums were secured during the last few months of almost every year. Second, the Los Angeles price structure has been unreasonably de- pressed for the entire period shown in figure 7. In fact, the indicated price rela- tionship between Los Angeles and San Francisco has been such as to make it economically feasible for products to be moved on a continuous basis from the former to the latter market. Furthermore, the depressed prices at Los Angeles in reference to Chicago, when compared with the transportation cost differentials from midwestern points, make it difficult to explain the economic basis for the large volumes that have been moving to that western market. The causes of the low price levels for cured pork products at Los Angeles are not known. It is doubtful that they could be discovered — even by intensive re- search — because of the complexities of marketing and the heterogeneous nature of the products. Certain hypotheses can, however, be suggested as possible causes although there is no evidence to support them. First of all, cured pork is not a highly standardized product, and it is possible that the prices quoted at Los Angeles are for a grade that is inferior to that covered in the Chicago and San Francisco re-" ports. As far as the reports are con- cerned, the prices used were for the same product at all markets. It is believed that no significant difference in grade has existed for the midwestern pork marketed at Los Angeles, San Francisco, or Chi- cago. It is possible, however, that the price range for a given grade is larger (whether due to volume discounts or to a broader designation of the grade) at Los Angeles than at the other markets and that monthly average prices com- puted on the basis of the mid-points of the daily ranges would be depressed even though the upper points were geographi- cally consistent. A casual review of the semiweekly reports indicates that this may be the case, although it is not known whether this situation is accounted for in the compilation of the monthly average prices that are released as annual reports. Second, it is possible that the Los An- geles market is considered by some processors as the "dumping grounds" outlet in attempting to practice geo- graphic price discrimination. Being a large, isolated market at the terminus of a deficit area makes it nearly ideal for this purpose. It is also reasonable that most cured pork processors view them- selves as semi-monopolists with brand differentiation. Furthermore, perhaps only six or eight major companies pro- duce the bulk of the branded bacon and ham, and consequently a market struc- ture prevails that deviates greatly from perfect competition. Generally, such a market structure is potentially unstable in price policy and in market shares so that the stability of the depressed price at Los Angeles appears to be unusual. A possible explanation is the existence of a long-run sales policy whereby each firm realizes that it is difficult to re-enter a market once having withdrawn from it. This may also explain the continuous ac- ceptance, by all firms, of low prices in a "dumping" market when it would be more profitable, in the short run, to quit that market. Fear that the remaining firms would discontinue the low price policy holds some firms in the market when they might prefer to quit. If they were not able to offset their "losses" in the dumping market through more than competitive returns in other, "protected" markets, or through profits on other com- modities, they would eventually be forced to quit. [22] Comparative Slaughtering Margins in California and the Midwest This section is concerned with the ag- gregate effects of the product and hog prices as they relate to net packing mar- gins. These comparisons should be made for each market to appraise the efficiency of the live hog market in reflecting the net value of pork products. Unfortu- nately, no reliable estimates of slaughter- ing and packing costs are available to use in estimating net cut-out margins. Con- sequently, it will not be possible to deter- mine whether live hog prices have been in conformity with competitive profits from the sale of pork products in any given market. Packing costs have presumably been slightly higher for California plants than for the Midwest because of higher wage rates and less efficient utilization of ca- pacity. Therefore, a comparison of gross packing margins should indicate whether California slaughtering plants have real- ized a relatively better or poorer profit position than midwestern plants. The calculation of these gross margins, which are presented in figure 8, is based on loins (10.0), Boston butts (4.5), spare- ribs (1.5), picnics (5.8), hams (13.2), bacon (11.5), and lard (13.5). The fig- ure in parentheses after each of these products is an estimate of the percentage of live weight that the product represents in yield. The gross margin is on the basis of 100 pounds of live weight and is sim- ply the difference between the weighted aggregate value of the products (at wholesale prices) and the price per hun- dredweight for hogs. Weight categories for products are consistent with a Choice, 200- to 220-pound hog ; consequently, all prices used in the calculation of the mar- gins are consistent with the physical basis and yields. Since the price structure for hogs has been quite consistent between California markets and the Midwest, the relation- Fig. 8. Gross Slaughtering Margins per Hundredweight of Hog at Selected Markets. 2 5 $ ■o * 4 c a» , a. o «/> O o2 Los Angeles Chicago I - M M L J 1948 [23] S 5 a> $ •o a> £ 4 c 3 a. 3 o o O I - S.F. LA. _L M M J 1949 N S 5 9 •a ■S 4 c 3 0) , Q. O in o I 2 S.F. M L.A. M L_ J 1950 [24] JZ o» S ■d 4 •I o C £ w 3 o Q. ■ * 2 Q ***» L.A I - M M 951 N S.F. £ 5 e ■o £ 4 C a. O § 2 L.A. -L M M J J 1952 [25] S.F 0) 9 "O 0> w 4 c Q. 3 10 w o § 2 »••••••-•• M M l_ J 1953 8 ? 7 3 01 •£ 6 c 3 Q. O O / \ / v x • •• V •• •- .^^ •••••••••••* L.A. , •••»• M M J J 1954 [26] ships for gross margins shown in figure 8 are primarily a reflection of inconsist- encies in the fresh and cured product price structures. The general results are line with these inconsistencies, in namely: (1) high margins at San Fran- cisco as a result of consistently high rela- tive product prices; (2) low margins at Los Angeles as a result of relatively de- pressed prices for cured pork products; and (3) a greater tendency for the mar- gins at Los Angeles than at San Francisco to follow the seasonal pattern of margins at Chicago as a result of more stable product price differentials. The relative levels of the three margins need appraisal. Assuming that the heavy slaughtering activity of the Midwest gen- erates competitive conditions which per- mit only nominal net profits, and that slaughtering and processing costs are higher in California than at midwestern points, the net position of Los Angeles plants has been very discouraging. On the other hand, the level of gross margins at San Francisco indicates that the net margins must have been greater than those experienced in the Midwest. Fi- nally, the validity of these statements rests on the authenticity of the assump- tions and on the accuracy of the relevant prices employed in the computations. Historical Results — Relative Rates and the Equal Advantage Condition Swine producers in the West are di- rectly concerned with the absolute levels of transportation costs on hogs and hog products, whereas coastal hog slaughter- ers are intensely interested in the relative rates (under long-run conditions of de- ficient local production) . The latter inter- est stems from the fact of the compara- tive advantage of hog or pork product inshipments. It is the relative transporta- tion costs that determine which is the more economical form. If actual transportation costs were equal for hogs and products, then the in- dustry would be indifferent to the form, provided processing costs were approxi- mately uniform. Should achievable proc- essing costs vary between firms in both the surplus and deficit areas (and at ap- proximately the same average levels), this variation would limit the number of slaughtering establishments to those which were most efficient. This variation would be the key to the stability and size of the aggregate slaughtering rate in both the deficit and surplus regions since in a really dynamic setting the marginal rate of entry into and exit from processing would be a function of diverse future ex- pectations and short-run lack of effi- ciency. With average costs of processing higher in the deficit area, a relative re- duction in aggregate slaughtering would evolve there. Figure 9 shows the magni- tudes of the transportation costs for the major alternative movements. Before the Fig. 9. Alternative Costs of Shipping Hogs or Pork Products from Omaha to Los Angeles.* 100 pounds of hog by railroad _____ J 16 pounds of fresh porK by truck \44 pounds of cured pork by truck fl6 pounds of fresh pork by truck J44 pounds of cured pork by railroad • Estimoted for recent railroad application, C- i243 1945 1947 T 1 1 T 1949 1951 Years 1 r 1953 1955 * If San Francisco were the destination, then the line for 100 pounds of live hog would be raised by increasing amounts, ranging from 4 cents in 1945 to 9 cents after May, 1952. [27] significance of these data is considered, it is necessary to know the basic assump- tions on which the total costs of product movements were calculated. First, rather definite tastes in pork consumption have evolved which separate the utilization of the carcass between fresh and cured forms. Loins, spareribs, and most of the butts, along with some shoulders, have been delegated to fresh utilization. Consumers have been willing to pay more for these parts of the car- cass as fresh meat than as cured. Hams, picnics, lard, and bacon make up the bulk of the cured forms. Excluding cer- tain minor parts of the carcass, these major products constitute about 60 per cent of the live weight. The fresh parts account for approximately 16 per cent, and the cured cuts make up the difference on this total yield figure. Second, the longer transit time for rail shipments and the high rate on fresh frozen pork prac- tically eliminate consideration of rail- roads for fresh pork movements. Conse- advantage in relationship, with a slight degree of advantage for the hog move- ment before 1952. Although figure 9 has been constructed with only Omaha as a basing point, the nature of the rate struc- ture would tend to shift advantage toward pork products for points east of Omaha and toward hogs for points westward. From the point of view of "equal advan- tage," it would appear that the rate change in 1945 was approximately right. 2 (The merits of this basis for relative rates are discussed in the next section.) It should be informative to investigate the implications of the railroads' current proposal, C-1243, of rate reduction on fresh meat and packing house products in reference to the maintenance of equal advantage. This discussion is based on Omaha as an originating point for west- bound shipments. The current rate proposal specifies a flat 50-cent per hundredweight reduction on the fresh meat rate, and that this re- duced rate will be the maximum rate on quently, the truck rates were used exclu- packing house products. This means that sively for this portion of the product the new fresh rate will also be the new shipment. Although not indicated on packing house product rate if it is lower figure 9, if a receiver of a rail shipment than the old packing house product rate, were not on a rail head, a local hauling The result is an identical rate of 228 cents charge should be added in arriving at the per hundredweight from Omaha on all total transportation cost. Perhaps 10 to meat products. After adding the relevant 15 cents per hundredweight would be service charges and tax, and accounting representative of the local delivery costs, for the tare allowance, the full transpor- It is evident from figure 9 that prior to tation costs would be approximately 282 November, 1945, a strong advantage cents for fresh meat and 296 for cured existed for the movement of hogs instead meat. These results assume that the re- of pork products. Since that date, the duction is calculated after the current 15 historical costs have been near to equal per cent surcharge has been applied. 2 This statement refers primarily to the pork industry, for which the railroad packing house product rate and the truck rate on the fresh products are relevant. For the beef industry, rail ship- ment of fresh beef is physically and economically feasible. Since November, 1945, the rail costs on fresh beef and on slaughter cattle have been almost perfectly in a state of equal advantage for movements from Missouri Valley points to California. Current estimates are $3.34 for fresh beef and $1.87 ($1.96 to San Francisco) for livestock per hundredweight from Omaha to Los Angeles. The rates shift toward the relative advantage of the livestock movement for points westward from Omaha. Critical carcass yield rates for slaughter cattle that would provide equal advantage for beef or steer movements under the above rate structure would be about 56 per cent for Los Angeles and 59 per cent for San Francisco. These values are very near to ordinary yields on Good and Choice slaughter cattle. However, since the early part of 1952, trucking costs on fresh hung beef have been about 25 cents per hundredweight under the rail costs so that this is the effective alternative which places live shipments at a slight disadvantage. [28] The reduction of the fresh rate will have little direct effect on the swine in- dustry since fresh movements by rail are currently impractical, and the reduction in the cured costs amounts to merely 5 cents. Indirectly, a further effect is likely to occur through a reduced truck rate on fresh pork, which will be pressed because of rather active competition between trucks and railroads on the movement of fresh beef. Currently, the trucking cost on fresh hung beef is 309 cents per hun- dredweight (including tax) and about 326 cents on boxed pork. Presumably, it might also drop to 282 (274 before tax) on hung beef, with an equivalent drop on boxed pork. (This would most likely be a maximum drop since the more rapid transit time for trucks should permit them to charge a slightly higher rate than railroads.) The latter cost would be about 298 cents per hundredweight after tax and tare allowances. It might be as- sumed that the truck rate on cured meat would not be decreased. On figure 9, two points have been drawn to indicate the potential effects of these reductions on the alternative trans- portation costs for the movement of pork products. For the truck and rail combina- tion, the decrease is about 7 cents per hundredweight of live hog equivalent, and for the complete truck movement, the reduction would be only 4 cents. Ob- viously, this reduction proposal could have a much greater impact on the beef industry. A final question should be answered. How much decrease in the livestock rate would be necessary to re-establish a con- dition of equal advantage? First of all, there seems to be no good reason for cur- rent livestock rates to be different from Omaha to Los Angeles and from Omaha to San Francisco. Assuming that both rates were identical and equal to the value for Los Angeles (187 cents), the lowest cost for the equivalent amount of pork products would be the complete truck movement at 174 cents. Conse- quently, a reduction of 13 cents per hun- dredweight on livestock would re-estab- lish equal advantage. This would mean a basic rate of 163 cents before service charges and tax, and would require a 21- cent reduction on the current rate to San Francisco. It should be pointed out that a part of these reductions on livestock rates reflects the fact that since October, 1954, the costs on product movements have been below the equal advantage position — especially for the complete truck alternative, since the rates on pork products declined on that date. Implications of the Historical Rate Structure As previously noted, two groups of people in the California swine industry are critically interested in the transpor- tation cost structure on inshipments of hogs and pork products. The producer or farm group is mostly interested in the rate level which indirectly sets the California hog price differential over that of the Midwest. Of course, the rate level that is of interest is whichever is lower, the one on hogs or the one on products, on the converted basis that reflects yield. Assuming that a lack of local slaughter- ing facilities would never prove a bottle- neck for the disposal of California hogs, it would appear that the farm group should be somewhat indifferent to the relative rates on hogs and pork products. Local slaughterers, in contrast, are mainly interested in the relative rate structure since the economic availability of external hog supplies to supplement the local supply is a key factor in the efficient utilization of their slaughtering capacity. Consequently, regardless of the general level of the rates, they should de- sire a relative structure that gives advan- tage to live animal inshipments. The in- terest of local slaughterers in the rate level stems from their desire for an ex- [29] pansion in local production to reduce their dependence on distant supplies that can be jeopardized by relative rate changes. High rate levels would therefore be in the interest of both groups. A third group of Californians, but one which never expresses a collective inter- est in transportation cost problems, is the consumers. Generally, for all products, and specifically for pork, their interest should lie in support of lowest possible transportation costs. Under long-term considerations, this viewpoint should also be that of the producers. During short periods, however, critical losses and gains can result from changes in the transportation costs structure that abruptly shift the competitive balance between competing areas. Evaluation of the effects of past rates from the Midwest will center on coinci- dent changes in the level of California production and the composition of in- shipments. This analysis must consider both the changes in the level of rates and the changes of the relative levels between hogs and pork products. In general, the discussion will be based on evidence pre- sented in figures 3 (p. 6), 9, and 10. From the viewpoint of the midwestern producer, transportation costs to Cali- fornia (whether on hogs or products) are a part of his production costs. Since 1940, and especially since 1945, these Fig. 10. Comparisons of Changes in Trans- portation Costs on Hogs or Pork Products from Omaha to California Markets with Changes in Farm Wage Rates and United States Average Com Prces (1946= 100). -— Transportation cost indei "' Form wage rates mdes "-US corn price >nde< freight costs have been rising continu- ously in numerical size. This situation does not mean that the competitive bal- ance of production costs has been shift- ing in favor of the California producer since the general price level, other pro- duction costs, and money incomes have all risen in dollar terms over this period. Consequently, the transportation costs changes must be compared with changes in other production costs. Since grain and labor probably account for nearly 80 per cent of total hog production costs, only these two items will be considered in the comparison. United States average corn prices and average farm wage rates will be used. Figure 10 gives the information re- quired to appraise the rate level prob- lem. All of the indexes (freight costs, corn prices, and farm wage rates) have been converted to a base value of 100 for 1946. From this vantage point, we can look back toward 1940 and forward to the present in our comparison of relative changes in the three cost series. The base period of 1946 was chosen because it was the beginning point for postwar increases in freight rates and because, only shortly before (November, 1945), the relative railroad rates on hogs and pork products had been significantly modified. Figure 10 indicates two major facts: (1) Before 1946, corn prices and farm wage rates rose more rapidly than did freight costs. (2) After 1946, the reverse was true except for the high corn prices of 1947. From the competitive balance viewpoint, freight costs changes from 1940 to 1946 were to the relative advan- tage of midwestern producers, and to their relative disadvantage after that date. Figure 3 (p. 6) does not suggest that these shifts in relative advantage had much influence on the trend of the rela- tive supply produced on California farms for local demand. Perhaps the decline in percentage of supply coming from Cali- fornia farms between 1942 and 1946 [30] could reflect the economic forces stated above, but it is believed that wartime re- strictions on prices and consumption were more responsible. Since 1945, the percentage of the supply coming from local production has continued to decline slowly, whereas the relative advantage in transportation costs suggests that it should be rising. Apparently, the value productivity of resources that could be used in swine production in California has been rising more rapidly in other enterprises than in swine production. The profitability of these alternatives must have been rising more rapidly than for alternatives in the Midwest. Historical changes in the relative rate structure have affected the composition of the total inshipments of swine and pork products. Figure 9 indicates that be- fore November, 1945, a strong advantage existed for the movement of hogs instead of pork products to make up for Califor- nia's deficit production. This situation ran back into the 1930's. After 1945, the rate situation was nearly in a state of equal advantage. In accord with these conditions, two things should be ex- pected — a gradual rise in percentage of total hog inshipments before 1945 and a stabilized, but lower, percentage since that date. The data conform fairly well with these expectations except for the precipitous drops from 1941 through 1945. (These logically should have oc- curred in 1946 and 1947 after the rela- tive rate adjustment of 1945.) It is rather interesting that the rate change was made after these decreases, when some of the effects that would un- doubtedly have followed the change had already taken place. Furthermore, from the gradual rise in the percentage figures after 1945, it appears that the wartime decreases were greater than necessary to reach a new, stable level commensurate with the modified relative rate structure. Apparently, the stable average level would be about 35 per cent for the post- war rate structure in comparison with between 50 and 60 per cent for the pre- war structure. Transportation Cost Data All cost data are based on official rates charged by common carriers. As such, they do represent, quite accurately, charges collected by railroads and by the bulk of the commercial trucking indus- try. However, it is widely known that a significant portion of the meat movement takes place at costs or rates that are prob- ably lower than these established rates. For instance, some shippers have their own trucking equipment, and it is not known whether their costs are above or below official rates. Another method of movement that avoids controlled rates is the taking of load ownership by small trucking concerns and immediate sale upon return to California. These oper- ators generally move exempt raw agri- cultural produce to the Midwest and are intensely interested in a profitable return haul to the Coast. Finally, certain leasing arrangements of trucking facilities also by-pass the official rate structure. In general, nearly all of the above devi- ations from common carrier service are perfectly legal and, in an economic sense, good if they promote competition in transportation charges and reduce them to competitive cost levels. Such devia- tions do cause trouble for the controlled carrier who has little or no short-period flexibility in his counter-competition. However, it is not intended to evaluate these operations in detail but to point out that their existence may be the source of the significant marginal shifts in the in- terarea shipments and that their activity clouds the inferences that have been based on published rates. Detection and prosecution of trucking activity in viola- tion of legal conditions are extremely difficult and sporadic. [31] The Equal Advantage Proposition What can be said about the "equal ad- vantage" condition as a basis for relative rate relationships for the livestock indus- try? It seems to be a "live-and-let-live" proposition with large areas gaining or losing as increases or decreases occur in the general rate level. So much has been said about this issue that it has taken on a moral significance that has squeezed out many of the economic ingredients of the problem. It can certainly be said at the outset that it is not good for the econ- omy to have the relative rate structure continuously oscillating so that compara- tive advantage is shifted back and forth between livestock and meat movements. Intermittent relocation and liquidation of slaughtering facilities in surplus and deficit areas are not economical ways of employing resources. This is a reason- able basis for arguing in favor of the equal advantage structure but certainly is no justification for it. A stronger basis for resolving the argument, but one that could be extremely difficult to establish, is the relative costs of using resources to provide transportation services for live- stock and for meat products. If it can be demonstrated that meat products can be transported more economically than their livestock equivalent, then the rate struc- ture should (and would, under efficient competition) reflect this fact. In other words, a rate structure that reflected cost advantages would provide for a better utilization of resources than would one which maintained equal advantage through subsidization of one rate by the other or by rates on other commodity lines. In theory, this criterion is easily stated. In practice, the cost measurement prob- lem would be difficult and quite arbitrary on numerous joint cost allocations. For instance, how would one allocate general overhead costs and costs of empty move- ments or normal, unutilized capacity to the multitude of products involved? The existence of specialty truckers and owner- operated trucking operations would be of some help, but again, they would in- dicate costs of alternative methods rather than costs for the railroads. An indirect approach might prove feasible. It would rely on the results of competitive activity in the transportation field to provide guides on relative costs and would assume that the greater degree of competition within the trucking field would tend to make those rates reflect costs. This line of reasoning can be ap- plied to the historical results of competi- tion in transporting livestock and meat products from the Midwest. For very long movements of livestock, the railroads have dominated the actual shipments in the past. Apparently, rail rates have continuously been below the achievable cost levels for the trucking operations since the latter have been re- luctant to enter the field. Their activity has been limited to short and intermedi- ate distances. It is quite possible that the historical rail rates have been below any reasonable measurement of cost for their own operations. Proof of this would re- quire a most difficult cost study, but from the general picture of rail versus trucking rates on all commodities, the rail live- stock rate on long movements would un- doubtedly stand out on the low side. On meat products, common carrier truckers have been active competitors of the railroads. In turn, owner operation of trucks, and other deviations of the truck- ing industry, have been active competi- tion for the commercial truckers. This competition has become more intense in recent years and has driven the commer- cial truckers to propose rates which per- mit them to compete on price. Since early 1952, the resulting trucking costs on meat have been slightly below the equiva- lent railroad costs on livestock. No ac- count has been taken of the added value of more rapid transit time for trucks. [32] Thus, there is some support for the contention that costs of moving meat from the Midwest to California are some- what lower than the costs for an equiva- lent amount of livestock. Overtly, this implies that the equal advantage concept may not have a very strong economic basis, but the case certainly has not been proved. A more detailed investigation of some of these problems would require more re- fined data on the composition and owner- ship status of the interarea shipments. It is hoped that such data will be made available in the future and that the present study will provide a useful foundation for economic decisions on swine production and marketing in California. APPENDIX Sources of Data 1. All prices were taken from official United States Department of Agriculture reports. Usually, the specific reports employed were the annual summaries re- leased for each relevant market. 2. Human population figures for California were taken from the P-25 series of the United States Bureau of the Census. 3. Hog production in California was estimated from data in the annual reports of the Crop and Livestock Reporting Service of the state. Essentially, the production estimates are equal to the annual pig crops, lagged six months, minus the net inventory changes. 4. California hog slaughter was considered equal to California farm production plus inshipments. These figures differ from those reported on federally inspected slaughter, and were believed to be more accurate estimates of total slaughter. 5. Per capita hog consumption for the United States was applied to California, and was secured from the United States Department of Agriculture estimates pre- sented in Miscellaneous Publications 691 and its supplements, as well as in many other places. These data are in pounds of pork (excluding lard), and were con- verted to hog numbers on the basis of 56 per cent yield for a 250-pound hog. 6. Basic freight rates for rail shipments were calculated through the application of the percentage increases designated in the historical series of tariffs affecting these products. Personnel of the Southern Pacific Railroad Company assisted in this task. 7. Trucking rates were secured from the historic file of tariffs maintained by the Pacific Intermountain Express Company. 8. Service charges for livestock shipments were calculated by applying feed prices to the quantities designated to be fed at the required stops. 9. Icing costs for product shipments were estimated from information supplied by the Pacific Fruit Express Company of San Francisco. This information included ice requirements, frequency of icing, and the cost of ice. 10. All service charges were computed on a car basis and then converted to a hundred- weight of product involved. Carload minimums were 24,000 pounds for hogs and 30,000 pounds for pork products. The author wishes to acknowledge the assistance of Emory R. Stoker and John A. Mollett, Research Assistants in Agricultural Economics, in collecting and analyzing many of the basic data employed in this study. [33] COS o E O E o u ■o k a. k o o- o S' 3 • 5 ?* X c •J * 1 s ° is, «/> C s k 3 8 £ o *< W.0 M — . n eo a) © «H t> u o ".a CO y a n a) w o S » *« > U .0 !S <« « S-s » w o fl) to ©Is .fc > b CO y m ■§§J8 pqxi * w — J) D J) s ■u c o fi. < o 04 03 43 bp i* a 0) 0. tO T»H CN CN ^ © 00 o b- o 00 00 CN as b- 00 o CO ■<* IO CO co b- b- y-t iH o 00 CN CO ■^ o N* b- o o o t4 CO CO CO ■^ "tf ^ IO to IO IO to to b- to # CO Oi iH O CO Ol 00 TJH CO 00 to o O CN CO o iH to o co ■^ b- iH CO iH o iH i-H CO CN ■^ "«* to to CO CO b- CO b- CO co CO 00 b- co b- 05 00 CN CN 1 1 CN CO CO 0) CI O o o o o CN CN PI eg •-9 to C5 (-1 a) ^3 o b- Oi C5 3 b- -«* oc Tt iH Tt Oi -«* CT o. •H OS iH -J P co S3 •-9 CO iH 0) J2 O o o to >> l-H 03 Pi a3 •-9 >» *-. c3 S3 Pi o3 »-9 l-H S o. CO £1 o Q to a •c IO o 00 CN •♦» M PI bo PJ CN IO OS CN >> o3 o a •3 bO a e 04 a u ta 04 •a a S3 ss •-> is. 0) 0.O. 4) CQ *0 bo < ca O o CI] •3 ► ea a) 09 tH •8.8 ■»■< fci a. M e3 ■ M® «J 4-a CQ 0) CO Appendix Table 2. Truck Transportation Costs on Pork Products from Omaha to Los Angeles and San Francisco Rate period Fresh* Cured* December 1, 1944 . January 20, 1947 . . July 22, 1947 October 30, 1948 . . October 27, 1949 . . November 22, 1949 February 20, 1952 . January 16, 1953 . . January 15, 1954. . October 14, 1954 . . December 11, 1954 cents per hundredweight 276 236 293 249 332 283 365 311 414 354 327 323 327 315 346 315 330 315 330 286 326 286 * Includes 3 per cent tax and a 10 per cent package weight allowance where applicable. Appendix Table 3. Estimated Truck Transportation Cost Differences on Pork Products from Des Moines to Chicago and from Des Moines to California Rate period January 1, 1948 . . . October 30, 1948 . . October 27, 1949 . . November 22, 1949 February 20, 1952 . January 16, 1953 . . January 15, 1954. . October 14, 1954 . . December 11, 1954 Transportation cost differences* Fresh Cured cents per hu ndredweight 299 255 328 280 373 319 294 291 294 283 311 283 297 283 297 257 292 257 Includes 3 per cent tax and a 10 per cent package weight allowance where applicable. [35] Appendix Table 4. Rail Transportation Cost Differences on Cured Pork Products from Des Moines to Chicago and from Des Moines to California Rate period Basic rate differences Estimated service charge differences Total trans- portation cost differences* cents per hundredweight July 1, 1946 January 1, 1947. . . October 13, 1947.. January 5, 1948 . . . January 11, 1949. . September 1, 1949 April 4, 1951 August 28, 1951... May 2, 1952 110 129 142 155 163 170 173 183 211 16 18 18 18 20 20 20 20 20 146 168 183 198 209 218 221 232 264 Includes a 3 per cent tax after 1942 and a 10 per cent package weight allowance. 7|m-6,'56(B7973) LL