Weekly Purcell Report

by 5m Editor
22 September 2004, at 12:00am

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

I missed the call on the October lean hogs when I said I did not see a reason for that contract to rally from $68 as we move into the highest daily slaughter levels of the year in October and November. Riding strong demand, cash prices have boomed again in a contra seasonal fashion and are up to a weighed average of $77.71 Tuesday morning.

It is always harder to see demand and see why prices are moving up when slaughter is up significantly from last year, but it has to be demand that is bringing the moves. I suspect a big part of it is still coming from the export side of the equation as beef shipments are still blocked to Japan, the talk does not suggest a settlement soon, and pork shipments to fill the void are very strong.

If the beef problem in Japan gets fixed unexpectedly soon, then we will see a shock in the hog market to the downside and I continue to suggest short positions in the October and December hogs. The upcoming Hogs and Pigs report is likely to show no significant increase n the breeding herd so the hogs well into 2005 may still have upside potential and I would wait on short hedges into mid-2005.

5m Editor