Weekly Purcell Report

by 5m Editor
24 March 2004, at 12:00am

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

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The weighted average price for slaughter hogs on a carcass base is above $66 per hundredweight. I think these strong prices are due almost totally to the increased demand for pork in the world market where many of the trading channels for our beef have been closed due to the BSE concerns.

It is apparent, for example, that when Japan is not buying beef they will buy much more pork. With supplies essentially already determined in the short run, it simply adds to the demand side of the price equation and bids up prices.

April hog futures have traded up to as high as $67.30 on Monday. I think up at these levels, short hedges are in order. I don't see reasons for substantial moves up from here. When I look at the July and find that it is trading only $.150 or so higher than the April, I am much less inclined to place short hedges in the July.

We will see the seasonal surge in the hog prices for the summer months. What could keep that from happening this year, of course, is if these trade channels open up completely for beef before we get to the summer.

Then we lose that demand side kick for pork and could end up with a summer hog market that is priced about where the March / April hog market closed. I would still be carrying the risk in the cash market on these summer hogs, however, and be looking to establish or reestablish short hedges on hogs to be sold for the rest of March and into early April.

5m Editor