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Bryan Doherty Hog rally requires attention

Agriculture.com Staff 08/11/2006 @ 12:50pm

The hog market has made a steep recovery in the last week and a half.

Most futures contracts are offering premium to cash prices. After a strong rally into the summer months, demand slowed, and supplies began to increase. However, a couple of weather events with two waves of extremely hot temperatures may have helped limit weight gain and movement.

This, in turn, helped to provide underlying price support. In addition, once prices declined, demand also picked up. However, we caution producers to recognize just how fast prices can drop when they make a turn, and we believe the hog market, especially going into the third and fourth quarter, could have some trouble.

Last year, it was widely expected that breeding problems could lead to tighter supplies into the summer of 2006. That concern materialized, but we also believe that the sows and gilts that did not breed were put back into the breeding cycle. This means increased supply into the late third and fourth quarters for this year.

Unless demand is stronger than anticipated, we are encouraging producers to place sell stops under futures in order to get hedged, if prices drop. Also consider forward contracting on rallies or implementing PUTS or fence strategies. Not using a strategy may be the most speculative position a producer can take. At times, this position pays dividends, but most of the time, having this position ends up leaving you much regret and financial woes.

If you have any questions, comments or would like us to put together a plan for you, contact Top Farmer at 1-800-TOP-FARM, ext. 129.

The hog market has made a steep recovery in the last week and a half.

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