Cash hog prices began last week strongly, whereas pork cutout values backed away from a recent high. Cash news apparently powered the big Monday-Tuesday surge last week in nearby CME futures, which pushed the December contract to its highest close, at 67.85 cents/pound, since early June. The fact that it remains substantially discounted to the CME index, which was estimated at 74.27 cents last Thursday, likely encouraged bulls as well. Demand seems robust, while the disparity between 2015 and 2014 hog supplies is diminishing from the huge levels seen during summer.

However, the late-2015 outlook may not be all that rosy, with the ham market likely being key to November-December developments. The hog and pork industry has clearly reacted as one would expect to the widespread belief that Minnesota turkey losses to the spring avian influenza outbreak will create a shortage during the upcoming holiday season. This week’s monthly USDA Cold Storage report offered partial confirmation on this point, stating Sept. 30 whole turkey stockpiles at 268 million pounds, down 29.2 million pounds (9.8%) from last year.

 In contrast, U.S. ham stocks surged to 247.4 million, which smashed the former ending-September record at 221.63 million from 2013.  Given expectations for late-autumn hog and pork production to run 3%-5% over year-ago levels, one has to worry that ham supplies will swamp the market. We worry that excessive supplies will cause a late-autumn drop similar to that suffered last year, especially if the anticipated turkey shortage proves less drastic than is generally anticipated. If so, the hog market may also prove comparatively weak as 2015 winds down.

Editor’s Note: Dan Vaught is a livestock economist for Doane Advisory Services, St. Louis, Mo. Doane distributes a number of timely, relevant newsletters to farmers that contain expert commentaries and market advice. For more information, call 314.569.2700 or go to: www.Doane.com.