Last week’s events in the hog and pork sector apparently favored bullish ideas about the summer-fall outlook. First came resurgent pork gains, with Tuesday’s cutout value climbing over 2.5 cents/pound from July 17’s closing quote and about 4.25 cents above the July 10 low. Again, we think grocers are slowly lowering retail pork prices in response to drastic cuts in wholesale values, thereby spurring consumer buying.
Wednesday morning brought the Iowa-Southern Minnesota report on pig weights, which indicated a 2.0-pound weekly dive to 277.3 pounds/head. As the chart above shows, that reading marked a 7.5 pound/head annual reduction. Not only does this imply pork production/head is coming in about 2.5% below year-ago levels, it suggests the supply of market-ready animals is tightening. The chart indicates a seasonal drop in hog weights is to be expected at this time of year, but if the USDA’s June Hogs & Pigs report was correct, late summer supplies could dwindle from around 9% over year-ago levels toward 7% annual increases during autumn.
Tuesday’s pork surge and the early weight news caused nearby August futures to gap higher on Wednesday’s opening, with the contract surging past its pivotal 40-day moving average in the process. That may signal a sizeable follow-through advance.
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.