Developing Economic Indexes for the Quebec Hog/Pork Industry

The Quebec hog/pork industry has grown significantly over the last 25 years. Explanations of this growth in the literature have centered on government policies, expansion of profitable market opportunities, and reforms in marketing institutions. A coincident index model that trends with total hog slaughters in Quebec is estimated using a dynamic factor model. It implicitly defines a variable that measures the overall state of economic activity in the Quebec hog/pork industry. The results show that reforms in hog marketing institutions are strongly correlated with the economic expansion of the industry. A leading economic index also forecasts the growth of the coincident index using leading variables. The overall statistical performance of the leading coincident index is disappointing, but the growth in American inventories of frozen pork meat is shown to have useful predictive value.