While there were no big surprises on the supply side from USDA’s Hogs and Pigs report, the big story in the pork industry continues to be on the demand side of the equation. The incredible pork demand, probably due to the popularity of high-protein diets, should keep the price of pork and live hogs strong through the end of the year.
Economists Chuck Leavitt, Alaraon Trading; James Mintert, Kansas State University and Robin Fuller, Tallgrass Consulting, all predicted the unusually strong pork prices would continue, when asked for a National Pork Board commodity roundtable.
Leavitt expects large slaughter numbers to continue, with about 25.5 million head in the third quarter and about 27.2 million in the fourth quarter. Demand is up about 3.8 percent in the second quarter and up over 4 percent for the first half of 2004, says Mintert, and this will keep prices strong through the remainder of the year.
“A big reason for the increased demand for all meats is the high-protein diets and I don’t see that slowing down in 2004,” says Mintert. “Long-term I don’t know if this demand situation will continue, but it really helps us out with the current large supplies.”
As far as prices, Leavitt expects about $70-$72 for the third quarter and $60-$63 for the fourth quarter, on a 51-52 percent lean basis. Mintert and Fuller see similar prices, which would be about $52-$53 for the third quarter and the mid-$40s for the fourth quarter on a live-weight basis. These markets look strong but aren’t rock solid, and you might explore your options.
“Producers should be taking a look at options and hedges in options, to offset some risk in case demand falls,” says Fuller. “That scenario is probably more likely next year than this year, but with the levels the futures market is at it offers some price protection.”