Home / Markets / Markets Analysis / Hogs market / 2008 hog prices to dip below $40, analyst says

2008 hog prices to dip below $40, analyst says

Agriculture.com Staff 10/24/2007 @ 8:05am

Large supplies for the end of this year and to start 2008 could keep live hog prices near the $40.00 per hundred weight level or below, one analyst says.

Dan Vaught, livestock futures analyst for AG Edwards & Sons in St. Louis, Missouri sees hog prices pressured to start the new year.

Because of better profits for the producers and meatpackers, the hog and pork industry has seen great expansion in the past two years. In addition, the introduction of a vaccine for the circovirus disease has increased the number of hogs available for slaughter even more.

In 2006, the viral disease killed hogs being fattened for slaughter or caused slow growth in those that survived.

"So, we're definitely looking at stronger hog supplies," Vaught says. "The big question for prices is the underlying strength in forthcoming demand."

In mid-October, a record weekly hog slaughter record of 2.35 million head was set. This reflects the massive number of hogs coming out of barns into the packing plants.

That topped the old weekly slaughter record of 2.298 million head set in 1998.

The remarkable thing is that hog prices have held up during this period of increased production, mostly due to demand, Vaught says.

This demand is seen as temporary, according to Vaught. Though domestic demand has been strong, a lot of pork products get stuffed into the freezer during Thanksgiving and Christmas.

"The pork loin, the most valuable of pork cuts, hasn't seen great demand lately. We know hams will get their traditional attention, but the flat demand for pork loins doesn't bode well for hog prices going into 2008," Vaught says.

In addition, in the past 10 years, hog prices between Christmas and New Years have tended to come in lower than the Thanksgiving period.

PRICES FOR 2008

With February hog futures prices on the Chicago Mercantile Exchange at $63.30 and April $67.75, the bull traders may be getting ahead of themselves, Vaught says.

"I think we'll see mid to lower $50.00 dressed prices in mid to late winter or first of 2008," Vaught says. "That would be around $38.50 per hundred weight on a live basis."

On a live basis, Vaught sees the winter highs around $45, with a low in mid-February-March in the mid-to-lower $40's.

GRAIN PRICE PROTECTION

With increased ethanol production, rising livestock production, and world demand, producers are urged to protect their feedcosts against rising grain prices.

"Contracting or hedging feed sources and hedging hog sales on the futures market are all opportunities the producer should be looking to take advantage of," Vaught says.

Large supplies for the end of this year and to start 2008 could keep live hog prices near the $40.00 per hundred weight level or below, one analyst says.

CancelPost Comment
MORE FROM AGRICULTURE.COM STAFF more +

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Cool Tools Christmas Edition: Part 2