Weekly Purcell Report

US - Agricultural US Commodity Market Report by Wayne D. Purcell, Agricultural and Applied Economics, Virginia Tech.
calendar icon 17 September 2003
clock icon 3 minute read

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Things are a bit more normal from a risk management viewpoint in the pork sector. It is always important to watch the nearby contract, and I am generally very much inclined to want to sell and place short hedges or take profits on long hedges on a rally to the contract highs.

That is especially true if that past high is about as favorable in terms of pricing level as you can reasonably support from the ongoing supply-demand fundamentals.

We had a high on the October lean hog contract back in May at $59.60, and we have seen one close above that level at $60.375 last week on September 11, but we have not seen the two consecutive closes in new contract ground that suggests prices can go on up.

Thus, I would definitely hold short hedges you placed on a rally up toward that old $59.60 high. Make this market show us two consecutive closes above $59.60, and I still think that old high is relevant, before we think about buying these short positions back or in any way adjusting our risk management plan.

Obviously, this market has been helped by the rampaging situation in beef, but beef will not run continually higher, and as we move into the fall months we should see some seasonal pressure coming on these hog markets.

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