Farmers in Canada and the United States haven’t been shy to peg some prices in the recent hog market rally.
“They’ve taken to the recent rally and used it as a pricing point,” said Tyler Fulton, director of risk management for Hams Marketing.
“Producers are viewing this as a trigger to price.”
That makes sense, said Steve Meyer of the American analytical firm Express Markets because it’s hard to justify higher or even current prices.
“I wouldn’t miss the chance to price hogs on this deal,” said Meyer.
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“I think the whole complex is giving you some chances to price hogs for the rest of the year that you may not see in the cash market when you get there.”
Since April 21, Chicago July lean hogs futures have rallied from US$67.54 per hundredweight to briefly touch $80 May 17. That takes them above the highs reached in March and almost as high as the peak in February.
Fall futures have also increased but not as much as the July contract, about $5 in the past month.
Meyer said both the summer and fall prices are worth taking because “we’ve got a lot of hogs coming.” Slaughter volume will be high this summer, at around 2.2 million per month, and fall slaughter will come close to capacity.
Meyer said he thinks a more reasonable current summer contract price would be in the low-to-mid $70s.
Fulton said he thinks summer contract prices might rise because demand is stronger than expected both in the domestic and export markets, but he doesn’t know how long the market’s bullishness will last.
“There’s a view that we’re going to have just insatiable demand dealing with the three to four percent more production, until we see the fall run of hogs,” said Fulton.
“Expectations are pretty high.”
Meyer said he urged farmers to do some pricing in the February-March highs, and now that those prices are available again, he’s urging farmers to take action. Summer contracts often peak in May, so assuming that current prices will continue is risky.
Good exports, good domestic demand and surging cattle prices have helped hog prices recover to match their winter highs, but those factors can’t be assumed to last, the analysts said.
