“The government is very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But you must never forget that every one of these figures comes in the first instance from the village watchman, who just puts down what he damn well pleases.”
— Anonymous, quoted in Sir Josiah Stamp, 1929
Every three months, the swine industry collectively holds its breath as USDA's Hogs & Pigs report is released. The next three months are then spent slowly releasing its breath over whether the report was “right.”
While the blame or credit usually is directed towards the USDA, the accuracy and usefulness of the report hinges mostly on producers' responses to the survey, more or less reflecting the anonymous sentiments quoted in Sir Josiah Stamp.
Because the Hogs & Pigs estimates are often viewed with some apprehension, it is worthwhile to review the accuracy of the original estimates as they compare to the “final estimates.” Table 1 shows the revisions for the final estimates for 1993-1997.
The percent change numbers in the table show that USDA has actually been very accurate with their estimates of the pig crop. The revisions are based on observed slaughter levels and the more detailed information offered by the five-year census of agriculture.
Why There Are Errors
If the Hogs & Pigs report is so accurate, why is its accuracy so readily challenged?
Often it's a misconception of what accuracy means. The results in Table 1 are for particular reports and particular estimates. Most people examining a report compare it to previous periods' reports. They also tend to extrapolate other statistics (e.g., slaughter, live hog imports, etc.) to what the inventories should be.
The problem is, the slaughter data has errors and the relationship of inventory to slaughter is not constant. These comparisons can lead to perceived errors in the report. Three types of “real” errors are possible:
Sampling error. To avoid sampling error, National Agricultural Statistics Service (NASS) continually evaluates its sampling and reporting practices. Concerns about sampling error are why NASS now draws a sample more representative of larger operations that account for the largest share of hog inventories.
Measurement and recording error. Typing in wrong numbers, poor handwriting and crackling cell phones are mundane explanations for this error. Other factors include misunderstandings of variable definitions by respondents, such as recording gilts intended for breeding as market hogs.
Non-response and self-selection bias error. Self-selection bias is the most insidious source of error. NASS has taken special care to construct a representative sample of producers. However, compliance of this sample is voluntary. Non-participation can skew the original sample and affect results.
Two of these three errors are directly affected by producer actions and can only be corrected by producers.
Naturally, inaccurate responses reduce the usefulness of the report and also increase the incentive and value of private information collected by individual firms.
|U.S. December 1 Inventory||U.S. Annual Pig Crop|
|Year||From (000)||To (000)||% Change||From (000)||To (000)||% Change|
|Source: NASS, USDA “Final Estimates 1993-1997: Hogs and Pigs” Statistical Bulletin No. 951|
Bottom line, failure to participate or misreporting can hurt producers three ways:
The cost of the survey is the same regardless of accuracy, so non-participation wastes taxpayers' money.
Rewards are greater for those who can afford to collect and interpret private information, while those who rely on public information will find it less useful.
If your market advisory or brokerage service relies on the report for developing marketing advice, compromising the Hogs & Pigs report likewise compromises the value of that service. Of course, this effect is the same if you rely on the report and manage your own risk management strategies.
The Hogs & Pigs report is a vital piece of the market intelligence puzzle that assists all participants in the pork chain to make improved decisions that can reduce risk and assure efficient functioning of hog markets. There are direct benefits and costs associated with the survey, but accuracy and validity depend on producer participation.
Given the competitive stress on hog markets, public information such as the Hogs & Pigs report is an important way to level the market playing field. But keep in mind, it's only as good as the “village watchman” makes it. You are the village watchman.