Pork Prices Tracking Seasonal Pattern
The hog market is right on track with where it should be.
Cash hogs bottomed back on the 20th and are now 3.62 over that point. Cash pork is still not seen as a major value yet by end users and is only marginally higher than its low posted on Thursday. Supplies are set to decline into the summer.
On the bear side, let’s note that these supplies are still historically large.
Weekly kills came to 2.290 million head this week. That was under the 2.300 morning estimate we had. This is a rebound after two weeks of holiday-related slowdowns. This week’s kill was 7.2% over last year.
Expect supply to fall moderately into summer. Pork production was estimated at 487.4 million pounds according to USDA’s Estimated Slaughter report. That was 6.9% over last year.
We also have Prime Pork out of Windom, Minnesota, finally starting up with some trial processing this week. Expect those numbers to pick up in the coming weeks and a little more of a cash hog pull to be seen.
As noted numerous times before, we don't call the packing plant expansion to be a bullish thing from a producer perspective. We have built up our hog supply to a higher level mainly from cheap feed. With these extra hogs around, and only a moderately higher bump in demand, we are locked into the need for cheap feed (that is currently unprofitable to produce).
Yes, producers will easily clear 2017 with profits. It does not make us rest easy, though.
Allendale does not consider ourselves bulls even though we called for this rally and are on board the program via the speculative trade. We would like this minor seasonal rally to $77 to work on hedge sales again in May/early June.
This material has been prepared by a sales or trading employee or agent of Allendale Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Allendale’s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Allendale Inc. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.