Hog prices could be peaking, analyst says

Ample near-term inventory pressures rallies.


By Bryan Doherty, Successful Farming

Agriculture.com - 10/9/2020


†Hog futures have roared to life as front month October rallied from near $48 in early August to $75 in early October.


This $27 rally is significant and reflective of many things. Mostly, the expectation that supply needs in China are paramount and the export market has remained very active.


Yet, we believe thereís a little more to the story.


When coronavirus hit full force in late winter and spring, the result was a major crash in hog prices. Not only were logistics of shipping U.S. meat overseas a major question; importing countries were facing logistic problems to import pork (in particular, China), where ports were shut down. Adding to the issue were positive cases of COVID-19 in U.S. packing plants, many of which were shut down, creating a significant backlog of heavyweight hogs. It was a moment in time where everyone was scrambling in a different direction with no easy answers. What ensured was an environment for the eventual recovery in hog prices.


Producers took management practices to a new level, reducing supply through various means. It wasnít pretty or desired, yet euthanization was one course of action. Once prices found their low and began moving upward, momentum slowly built as prices continued to firm. An expected shortfall of supply by early fall set the stage for price recovery. Prices then moved dramatically higher as export sales picked up and reports of a shortfall of pork availability in China was noted.


However, the most recent Hogs and Pigs report indicated there is ample near-term inventory expected for the second half of the fourth quarter. The current rally may be short-lived.


October hog futures soared higher, yet deferred months didnít follow as quickly. Now that fall is here, and it appears there is an ample supply of corn and soybeans, the hog herd will be on the increase.


Ultimately, this could put pressure on prices.


While we expect export activity with China to remain strong, we also acknowledge that its internal supplies appear to be growing at a faster pace than first anticipated.


The bottom line: