To shift the risk of lower hog prices, consider forward contracting, selling futures, or purchasing a put.
It is likely, however, that demand will strengthen in the months ahead and farmer selling will remain light.
Some are suggesting that with today’s hybrids/genetics, weather doesn’t matter as much.
Buying futures is similar to owning corn in storage, in that it is subject to gains or losses as the market moves higher or lower.
On a cautionary note, herd expansion continues.
A corn producer who sells his corn in the spot market after harvest, and believes prices may go higher, could purchase a call option for the chance to be long the market and retain ownership.
From a price support rationale, probably the most supportive variable is that corn is currently priced at a level where most producers are losing money.
A recent price recovery in both live cattle and lean hog futures contracts is offering an opportunity for producers to lock in better prices than existed just a few weeks ago.
Ample supplies of many commodities, both domestic and worldwide, suggest there’s no urgency for investors to shift dollars into commodity ownership, at least not now.
Unlike soybeans, which have experienced increased volatility, the corn market continues to consolidate.