Does the scale indicate bullish or bearish?
Key element pork producers should be focusing on is profitability.
Dennis Smith, National Hog Farmer
Sep 03, 2021
When I approach the hog market from a fundamental perspective, I attempt to list all of the bullish fundamentals on one side and the bearish on another side. Then, I visualize a scale and attempt to quantify by asking which side weighs more? If the bullish list appears to outweigh the bearish list, a bullish hog market outlook is present. If the bearish factors appear to outweigh the bullish, a bearish market outlook is present. While elementary in scope, this approach works. At least it helps me. Boiling down the fundamentals to simple terms (which weighs more) helps to navigate extremely complicated markets.
The bullish fundamentals include the fact that we’re in a herd contraction, the fact that PRRS has been and continues to be a persistent challenge to producers, the fact that the economy is roaring as we continue to work back toward normalcy and the fact that frozen pork stocks are tight.
On the bearish side of the scale are some issues new to the pork market, and measuring their weight is extremely difficult. The bearish factors include the reduced chain speed as ruled by law, Prop 12 as voted into law in California, the success, or perceived success, in China rebuilding their hog herd which ties in with a slowing export outlook, and the perception that domestic demand for pork has slowed recently. Certainly, the slowing of domestic pork demand can be partially explained by record high belly prices this summer and sky-high pork trimmings prices, as well. Another bearish factor on the scale is continued labor issues at packing plants. The final, and quite scary bearish factor, is the very real possibility of an African swine fever scare in the U.S. Keep in mind if this disease makes its way to Puerto Rico, it will be considered in the U.S. and exports will be shut down for at least thirty days. This alone, is too much risk to live with.
Now, as I tap into my experience (I’ve been a broker for 35 years) my perception is that the bearish factors outweigh the bullish ones...