Hogs and Crude Oil - Economic Questions

by Bill Duesing

First broadcast on WSHU/WSUF-FM, December 11, 1998

Listeners to last week's show know we raise a few hogs each year on the Old Solar Farm. As our two pigs were nearing full size, the national market price for a full-grown hog was just $16 per hundred pounds. That's 16 cents a pound - about the lowest price ever (after adjustment for inflation). One of our beautiful, 250-pound Duroc hogs, containing a year's supply of pork for two or more families, is worth only about $40 on the open market. At that price, farmers lose between $50 and $75 on each hog they raise. Compare $40 for a whole pig to the cost of a supermarket ham or a breakfast muffin with sausage! The current price of the pig just doesn't make any sense.

Recent reports state that the cost for a barrel of crude oil is also near its lowest ever. One barrel of crude oil, containing 42 gallons of this non-renewable fossil fuel, costs about $11. Contrast that with the price of a gallon of spring water, or a quart of motor oil! In the short term, many experts expect the prices of both oil and pigs to continue to fall, maybe into the single digits.

Although $40 is a ridiculous price for a hog, it seems more credible that a hog's worth is equivalent to almost four barrels of oil, which is over 150 gallons. What's going on here?

Both hogs and crude oil have a real value as well as significant externalized costs that aren't considered or reflected in their current prices. The similarities between these disparate industries are uncanny. The combined forces of the market, government subsidies, regulations, and short-sighted accounting make this situation very destructive to society and to the environment.

Both industrial hogs and crude oil benefit from enormous government subsidies and tax breaks even as they cause serious negative environmental effects. Last month Time Magazine detailed some of the subsidies enjoyed by one large hog producer. In addition, taxpayers effectively provide a $36 tax benefit to large producers for every sow they put into production. Because each female pig produces 20 piglets a year, and the industry giants have been adding hundreds of thousands of sows, there's a serious glut of pigs. As the price falls, the government tries to help by buying pork in large quantities for school children, charity and Russian aid, resulting in more financial gains for the largest producers.

As for crude oil, in order to insure that the fossil fuel giants can buy it for $11 in the Persian Gulf, we pay $20 to $30 per barrel in taxes to defend their ability to buy oil there.

Low, subsidized prices encourage more consumption of both oil and hogs, which increases their environmental damage. The environmental effects of burning fossil fuels (climate change and air pollution, to name just two) and the long-term effects of enormous quantities of pig wastes are expensive problems caused by these industries that will cost future generations plenty.

Low prices also promote concentration of ownership in both industries. The Exxon-Mobil Oil merger is a recent example. The increase in the number of giant farms which can more effectively capture government subsidies and tax benefits accelerates the loss of small farms and increases problems in the heartland.

The average citizen would be at as much of a loss in dealing with a live pig as with a barrel of crude oil; helpless without the increasingly long and concentrated chain of processor, wholesaler and retailer required to get our food and energy.

Fortunately, we're not dependent on the mainstream market for hogs. We'll trade some of this local meat with friends, sell some to folks who appreciate fresh pork raised outdoors on a mixed diet, without antibiotics or medications, and we'll keep some for our growing extended family.

We're also fortunate not to have to depend on oil for heating. The sun streaming through our south windows, supplemented with a wood stove at night keeps us warm.

Low prices for industrial hogs and crude oil, together with the global economy and growth-oriented economists, are leading this society on a very dangerous and destructive path. We need to find ways to feed and power ourselves with fewer externalized costs.

This is Bill Duesing, Living on the Earth

This page and its contents are copyright © 1998 by WSHU-FM, Fairfield, CT, and by Bill Duesing.