US - This seems to be shaping up as a very traditional pricing year, as something always seems to short the pig supply in the 2nd quarter, writes Allan Bentley, Sales & Service.
The semen extender issue that we have all heard about but not much has been reported on should at least be part of the issue at that time.
I believe most of that extender was off the market by November 1, 2015. That math adds up to shorter numbers of pigs coming soon. We should see some $80 plus base bids. Watch the next few months and study the actual basis.
If the basis is at zero, the futures are going to fight the move higher. If that happens, fine, then sell those cash hogs.
What I would seriously look at is using the push from cash hogs that drives up the fall futures price to take an opportunity to hedge at least some of your production in the 4th quarter and maybe the 1st quarter of 2017.
Looking at a long term charts, the average price drop from the summer high to winter low is about $25 in the meat.
Use that number, just like the previous basis discussion, as a good guideline when deciding on a fair price for 4th quarter markets. I did not say profitable price but an indicator of fall pricing opportunities.
I read that the net futures long positions are very high. Exports are very good and domestic pork consumption is also going to be higher than the past. This is shaping up to be a year for pork producers to make some money, using a combination of cash sales and hedging opportunities.
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