Weekly Purcell Report

US - Agricultural US Commodity Market Report by Wayne D. Purcell, Agricultural and Applied Economics, Virginia Tech.
calendar icon 8 January 2003
clock icon 3 minute read

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The important December 30 quarterly Hogs and Pigs report showed total inventory numbers down 1 percent from last year with the breeding herd down about 3 percent.

If we look at the post-report price reactions, it suggests that most analysts expected to see that breeding herd and the total numbers down a bit more.

February and April hogs traded down hard and down the limit the day after the report, and now, this week, we are seeing these markets rally with price levels that basically have erased all of the post-report losses.

Going out a bit further to the July hog contract, which is showing a double top up around $63.75, the market had traded down there suggesting that we are going to have more pigs coming into the supply chain across the next few weeks than we had earlier anticipated. But that contract is also recovering this week.

I would be interested in hedging April hogs on a rally to the recent contract high, which is around $60.50 level. Looking ahead at the July, there is an opportunity across what appears to be a double top around $63.75, and I think rallies to those levels ought to be sold.

By all means, if you are not inclined to sell the rallies, hook trend lines to the mid-October low and to the mid-December low and be prepared to place short hedges in any of these various months that you need to deal with when you see a close below that trend line.

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