Pork packers are reportedly competing very aggressively for hogs this week, which probably reflects sizeable short-term delivery commitments.
That’s probably why industry sources expect this week’s kill to rise about 1% from last week (to about 2.05 million head). Prices reflect the current shortage, with the CME lean hog index expected to jump another 1.91 cents to 118.46 cents/pound this morning.
Again, the former record was posted in early-August 2011 at 107.84 cents/pound, when strong seasonal demand for the domestic market was hugely supplemented by Chinese export purchases. This still looks like panic buying from those farther up the production/marketing chain. As pointed out in last week’s commentary, early-March pork output has easily exceeded totals routinely produced at seasonal lows in early summer.
We would also argue that pork demand at the grilling season peak during the Memorial Day-Independence Day period routinely dwarfs that normally experienced at this time of year. Nevertheless, pork prices have also soared.
For example, ham prices reached 114.21 cents/pound Tuesday, with the ongoing advance crushing the former record at 100 cents from October 2011, when pre-holiday demand was still being exaggerated by strong Chinese buying.
And while grocers are probably building ham inventories in preparation for Easter on April 20, it’s doubtful that consumer demand is powering the surge.
We still think the hog/pork markets could suffer a massive reversal when wholesale buyers have met their short-term needs, thereby triggering long liquidation.