There’s light on the horizon for beleaguered hog producers who can lock in profitable prices for next summer.
Analysts and traders are hoping they can soon announce the end of the loss-making period that has devastated so many farmers.
“We’re almost at the situation where we can say the worst is behind us,” said University of Missouri hog market analyst Ron Plain.
The hog market usually bottoms out around Dec. 1 and picks up from there, generally leading to a spring rally.
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Analysts are not only hopeful that the turning point will arrive on schedule, however they are also relieved that present prices are much better than expected a few weeks ago.
Chicago December lean hog futures last week traded around $56 US per hundredweight, which is more than $120 Cdn per hundred kilograms. In mid-September, lean hog futures were below $44 US per cwt.
Tyler Fulton, risk management manager for the Manitoba Pork Marketing Co-operative, said most hog operations can make a profit at $140 Cdn per ckg, so the increase in nearby futures has made many come close to breaking even.
As well, spring contracts should allow producers to lock in profits.
May lean hog futures are about $72 US per cwt., which is more than $155 Cdn per ckg at a 95 cent dollar and using differences in the way Canadian and U.S. hog carcasses are weighed.
Fulton said he’s urging producers to take advantage of the rally in spring hog futures.
“Generally, lock in what you can,” Fulton said. “This is a call to action.”
But he’s less insistent about locking in nearby prices.
He suspects that this year’s fourth quarter prices will actually increase rather than go flat or fall, as normally happens.
“I think it’s entirely possible that we’ll experience a counterseasonal rally over the next month and a half,” Fulton said.
Unlike in the past, farmers are now actively hedging their forward sales, he said.
Many farmers appear to want the certainty of profits over the possibility for even higher prices, which makes sense to him.
“I think it’s just prudent to take protection on a marginal percentage of your production and add as time moves on,” Fulton said.
“Anybody who was active in the past year in forward contracting is hundreds of thousands of dollars ahead and has some stability in their operation.”
