Weekly Purcell Report

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

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

Cash hog prices are declining and packers are trying to buy hogs cheaper to get their margins in better shape.

If the daily slaughter levels stay high, they are likely to have some success as we move through a period in which turkey tends to be the entree of choice.

With December lean hogs at $75 and better, I would continue to want to have short hedges in place in late 2004 and early 2005 hogs. Later in 2005, it is likely that the beef channels to Japan will be open again and that will take demand away from pork.

With the December at $75, the July 2005 lean hog futures are $4 to $5 lower, a very unusual pattern. In the normal year, there is about a 10 percent decline in hog prices from December to July.

The unusual pattern being shown this year is indirect testimony to how important the increased export buying of pork in Japan, with the beef channels closed, has been to the pork and hog sectors.

5m Editor