What is the best predictor of the prices for fed cattle or market hogs?
But another good one is the sum of the cutout value and drop (by-product) value for the respective species. As the charts below show, the cutout value plus drop value is highly correlated to the price of the slaughter animal (live cattle and carcass hogs) for both species over the past 12 years. So, it is logical that the cutout value is highly correlated to the prices paid for the animals since it is represents the lions share of packers revenues. Additional revenues are garnered from selling the drop or by-products that are not part of the carcass. For beef, the hide is a major portion of this value. Pig skins are far less valuable though they have seen some increase due to their use in Ugg brand boots now popular with teen girls. Organ meats, blood, ears and cuts from the heads are the other major drop components. We do note that the very lowest hog price-cutout value observations come from the November 1998 through January 1999 period when pork packing capacity utilization was amon
