When is a trend not a trend or, is this the right way to Dublin?

You may have heard the old joke about the American tourist who asked a local Irishman how he should get to Dublin and the Irishman replied, “It depends on where you start from.” That doesn’t sound too helpful but, of course, it is a very precise response – and true. Sometimes I feel like that Irishman when I am asked, “What is the trend in prices?” The current position for US hog prices is a classic example of this question and answer routine.

Seasonal US hog pricesLook at the two charts shown here, the first shows the within-season behaviour of US daily hog prices (comparing year by year) and the second shows the long run, multi-year behaviour. Perhaps you can start to sympathise with the Irishman (and the market analyst) now. The smoothed series in the second chart is especially instructive. For most data series a smoothing operation will provide a rough guide to the trend in the underlying numbers. But that is obviously not the case for this chart. In the within-season chart similar problems occur even without any attempt to smooth the data. Many analysts don’t even try to compute trends within a year and just prefer to assess the seasonal behaviour in a comparative fashion.None of this gets us away from the fact that we are trying to get to Dublin – sorry, trying to find a trend.Why?Because Long run US hog pricesknowing the trend means we can reduce costs or increase revenues by making better decisions. As ever, getting answers to seemingly simple questions often needs a lot of thinking.