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Japan demand crucial for hog market

04/06/2011 @ 11:15am

U.S. hog farmers are not getting rich this year, much like last year. But late summer/ early fall prices may allow them to hold their own, one livestock analyst says.

Although weaker domestic pork demand could pressure hog prices, expected strong export demand is seen as price-supportive, says Bob Short, PFGBest.com senior livestock analyst. “An increase in demand could push cash hog prices to a range of $60 to $62 per hundredweight in August,” he says.

Seasonal Factors

Seasonally, the hog market runs up into August. At that point, the hog kills go up, while the pork products weaken.

For instance, the loin business starts to go lower. As the loin product prices fall away, so do the bellies prices. That’s because the BLT season is ending, at that time.

Ultimately, the hog market will correct itself in late-August into September-October, Short says.

“In November, we could see hog prices, on a live per hundredweight basis, dip between $53 to $55,” he says.

A seasonal indicator for the cash hog prices is the favorite trade on the futures market, Short says. “In August, traders like to be long the August futures contract and short the October contract.”

Japan Demand

The single biggest market factor going forward will be the amount of pork purchased by Japan, Short says.

In 2010, Japan bought 1.3 billion pounds of U.S. pork. The market has been trying to assess how Japan’s consumer would recover from this year’s devastating earthquake, tsunami and nuclear crisis. “This is the wildcard for the hog market. Are we going to ship Japan 25% of all of our pork exports again this year, repeating last year’s performance? They have the capacity to handle that much. It just depends on the country’s recovery.”

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