After a powerful spring rally and a recent selloff, where are hog prices heading this summer?That’s the question Canadian producers are pondering as they slowly recover from a brutal three-year downturn.Profitable warm season prices don’t seem an easy assumption this year, considering last year’s failed spring-summer rally that collapsed and plunged farmers into unexpected losses.Analysts’ answer to the question is mostly comforting but with a tinge of caution.“We should see a recovery earlier than we usually do after Memorial Day (May 31),” said Tyler Fulton, a risk management specialist with Manitoba Pork Marketing Co-operative.A hog price rally usually occurs every spring and lasts well into summer. However, the Memorial Day effect often introduces a short-term setback as prices retreat in the week leading up to the late-May American holiday.That’s because U.S. packers increase production in the weeks before the holiday to meet increased barbecue demand. However, they then reduce production in the few days before the weekend because new animals moving into the plants won’t reach retailers until after the holiday surge.This year hog prices surged much more profoundly in April and early May than in most years. However, they settled back earlier than what would normally be caused by the Memorial Day effect.Fulton said he thinks the slump will soon reverse, now that slaughter has dropped and grocery meat supplies will quickly run down.Hog market analyst Ron Plain of the University of Missouri said the recent setback is a product of high live hog prices causing a chain reaction throughout the supply chain and reducing demand.“We seem to have run up farm prices and eventually that forces stores to raise prices and once prices go up in the meat case, shoppers stop trying to empty the shelves,” Plain said.The futures market is suggesting that prices may be weaker in June and into the summer because of the April-early May rally, Plain added. However, they are still much better prices than farmers had previously received in the downturn.Plain said he is worried about the contagious effects of the Greek debt crisis and wider problems in Europe.Last year, the sudden eruption of H1N1 anxiety caused hog markets to collapse as countries shut their borders to North American pork. According to Smithfield Foods, China recently reopened its market to U.S. pork and has begun buying offal.An event such as H1N1 is impossible to predict, but growing anxiety over the European economy could have a less dramatic but continuing negative effect on hog and pork markets.“I worry that consumers’ attitude, which as been one of, ‘oh, we’re finally working our way through this recession and there are better days ahead,’ could revert back to ‘no, our worst days are ahead,’ and we’ll see that effect in the grocery store,” Plain said.
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