To What Surprises Do Hog Futures Markets Respond?

We re-assess the effect of new information contained in the Hogs and Pigs Reports (HPR) focusing on the rationality of the announcements. We find that HPR preliminary numbers are irrational estimates of the final numbers and market expectations before the announcements are also irrational estimates of HPR numbers. Based on these results we modify the conventional measure of new information entering into the market (i.e., announcement - market expectation), and incorporate final estimates and the market’s best forecast into the analysis. Results show modest statistical differences between the conventional and modified measures of surprise; however some economic differences, as large as 27 cents/cwt, emerged. We also find that, as expected, marketings information has a larger effect on short-term price changes and breedings information has a larger effect on long-term price changes.