Hog prices have been surging lately. For example, the CME lean hog index will very likely be quoted at 94.71cents/pound on February 28, which would represent a 9.09-cent jump from two weeks prior.
That has greatly encouraged bullish CME traders as well, as exemplified by the 10.52-cent surge posted by the April futures from its February 12 low to its February 27 high.
Traders obviously expect the advance to persist into the contract’s mid-April expiration and beyond, despite the hog/pork complex’s penchant for seasonal weakness during March.
As pointed out previously, much of that bullishness is predicated upon reduced market hog supplies from the ravages of PEDV disease upon the U.S. piglet population last fall and winter. However, hog slaughter during the first three weeks of February actually topped the year-ago total by 1.1%, thereby suggesting robust demand is playing a big part in boosting the market.
Having cattle and beef prices at or near all-time highs is probably spurring substitution demand.
Bullish traders were reportedly reacting to a report that Russia will lift its ban on U.S. pork imports (over the ractopamine issue) on March 10. However, we highlighted this information in the February 7 edition of this report, so it was not news.
Moreover, one has to wonder how aggressively the Russians will buy at the forecast levels; they’re not exactly known for being free-spenders.
Ultimately, we’re inclined to view recent April hog gains as being overdone, but the market shows few signs of peaking at the moment.