Hogs are a corn product. The cost of production of hogs depends rather more upon the price of corn than upon any other factor. Investigation showed that owing to the violent fluctuations in demand for corn and hogs during the war, there had been five periods between the beginning of the war and September, 1917, in which it had been more profitable to sell corn than to feed it to swine at the price of hogs then
prevailing, while there were only three periods when the reverse was true. In the preceding eight years there had been only two periods in which the direct sale of corn was more profitable than feeding it to swine.
The results of these periods of unprofitable feeding was to retard hog production, as the grower was discouraged from breeding during those periods. Hoover therefore decided that the maintenance of a proper relation between the price of corn and the price of hogs was the best method of assuring an increased production of pork. Furthermore, the violent fluctuations in the price of hogs tended to lift the price of the pork products to the consumer unduly, for at every new rise the stocks already in the warehouses over the whole country were marked up and the spread between the consumer and the producer thereby increased. A stabilization of the price of hogs was therefore as necessary for the protection of the consumer for the sake of a reduction of this spread as it was in the case of other foodstuffs.
In order that the swine growers should have an opportunity to participate in the determina
tion of what method would be most fair and effective in establishing this stabilization and stimulating production, a committee of leading producers was asked to investigate the whole matter. This committee made a report late in October, 1917, which, after setting out the situation in detail and calling attention to the imperative need of a stimulation of production, declared that although hog production for the ten years ending 1916 had been maintained on a ratio of 11.66 bushels of corn to 100 pounds of hog, there had been but little profit to the grower on this basis and that it would be desirable for the sake of stimulation to pay at least the equivalent of 13.33 bushels of corn per hundred pounds of average hog and, if possible, as much as 14.33 pounds. On this latter ratio the committee believed that production could be increased fifteen per cent above the normal. The Committee added an expression of its belief that "the best emergency method of immediately stabilizing the market and preventing the premature marketing of light unfinished pigs and breeding stock would be to establish a minimum emergency price for
good to select hogs of sixteen dollars a hundred pounds on the Chicago market."
As the Food Administrator had no power to fix prices by law, nor to guarantee a price for the producer backed by money in the U. S. Treasury as in the case of the wheat guarantee, the only means available to him to assure a stable minimum price for hogs was to come to an agreement with the principal buyers both of hogs and the prepared pork products that they would pay a price which would make this minimum possible. This was accomplished by Hoover, with the approval of the President, in the following way: The Allies agreed with the United States that their purchases of food supplies would be made through the Food Administration (as already explained earlier in this book). They then agreed with the Food Administrator that their orders for pork and pork products might be placed with the packers at prices which would enable the packers to buy the hogs offered them at not less than the minimum price agreed to between the Food Administrator and the producers. The orders for our Army and Navy, and for other large
buyers, such as the Belgian Relief and Red Cross, were also placed through the Food Administration upon the same price basis. The packers then agreed with the Food Administration that if these orders were placed with them at the stated prices they would pay to the producer the minimum price announced by the Food Administration. The combined orders of these principal buyers called for from thirty to forty per cent of the pork and pork products produced in the United States, and the price paid by them would obviously determine the price for the whole amount.
With this power, derived solely by agreement, and not, as many of the producers seemed to understand, or rather, misunderstand, by governmental authority exercised, as in the case of wheat, to establish a government-backed guarantee, the Food Administrator announced on November 3, 1917, that:
"The prices (of hogs) so far as we can effect them will not go below a minimum of about $15.50 per hundredweight for the average of the packers' droves on the Chicago market until further notice.... We have had and shall