Weekly Purcell Report

by 5m Editor
30 July 2003, at 12:00am

US - Agricultural US Commodity Market Report by Wayne D. Purcell, Agricultural and Applied Economics, Virginia Tech.

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Weighted average carcass-based prices in hogs are in the $57-$58 range, and that continues to put the live base equivalent in the low-to-mid-$40s. We are likely to see these price levels for some time to come, and there will be some seasonal pressure on price as we move toward the fall months.

Technically, it looks like the hog charts are trying to find a bottom (they are oversold), and I think what is going on in cattle is going to help the pork complex as well. The contract low on the August lean hog contract is $54.70, and that occurred back in August 2002.

We have seen prices within the past week on that contract as low as $56.50, and that occurred on July 24, before this market bounced for a technical rally. I would be aggressive in buying back short hedges on any dip by this August contract to that very important low at $56.50.

That support emerged slightly above a low that is on the chart in early February at $56.30.

I expect to see these hog markets pull some help from the cattle complex and give us a significant correction of this massive move down that we have seen since the highs occurred back on June 9.

Let this market run to the upside before placing or replacing short hedges. Any firm that needs slaughter hogs for processing ought to be placing long hedges at this time.

5m Editor