Hog prices to continue strong, but not in the high $50s as was hoped, says Chris Hurt, Purdue University Extension marketing specialist.
The first crack in the bullish sentiment surfaced this month as hog futures declined. July lean hog futures, for example, had a May high of $79.20 per hundredweight on May 2, but dropped to a low near $71 on May 20.
"Cash hog prices have tumbled as well from carcass highs near $80 in the first week of May to below $72," says Hurt. "Now the question is, can hog prices hold?"
Hurt points to pork supplies that have remained nearly unchanged from year-ago levels. Prices have performed admirably, averaging about $52.60 (per hundredweight live), 10 percent higher than the same period last year.
"Such strong price performance in light of unchanged supplies reveals the continued strength of pork demand," he notes. "The demand components this year include: strong exports; record-high beef prices, which are causing some shift to pork consumption; narrow pork margins; favorable consumer incomes and attitudes regarding meat."
Pork supplies for the rest of the year are expected to exceed 2004 levels by about 1 percent, he adds.
"While this is not a major deterrent to continued high hog prices, it does cast a possible bearish shadow, at least from $80 summer futures prices," Hurt says. “Summer futures markets probably just got too optimistic.”
Other factors to watch include pork levels in cold storage; market hog weights; and of course, expansion plans in USDA’s June Hogs and Pigs Report on June 24.
"Fall futures markets are suggesting live prices in the low to mid-$40s, and are likely building in too many bearish uncertainties,” Hurt says. “A more reasonable forecast is for fall live-hog prices in the mid- to high $40s. Lean-hog futures for early 2006 appear to be under pricing the fundamentals by several dollars per hundredweight."