Most numbers on the USDA’s June 30 Hogs & Pigs report held clearly bullish implications, since they fell short of industry expectations. Those pertaining to late-2014 supplies were the best examples in that regard. However, the short-term outlook seemed less supportive, because the large matched industry expectations for 4-5 percent supply reductions during summer.

Nevertheless, CME traders reacted bullishly as they harbored strong suspicions that widespread talk of much larger third-quarter supply reductions was more accurate. 

Prices have soared since the report, with the CME lean hog index setting a fresh all-time high at 130.93 cents/pound on July 8. In fact, last week’s 1.627 million-head kill fell 8.8 percent under the comparable 2013 result. It would be easy to construe that cut as a sign of things to come, but the fact that Independence Day came on the weekend probably played a major role in the large reduction. And while last week’s Monday-Wednesday total is only 2.3 percent below the year-ago figure, the weekend result will be the key to the weekly figure.

We would once again point out that late spring-early summer hog and pork demand has seemed phenomenally strong. The fact that surging hog weights have boosted pork production since June 1 9.8 million pounds (0.5 percent) above comparable year-ago levels confirms this phenomenon, especially with prices averaging 17 percent over June and early-July quotes from last year.

On the other hand, it’s rather clear that CME traders doubt the demand surge will last, since August futures fell to a sizeable discount to the CME index Thursday. We harbor similar suspicions, although the recent cut in our third-quarter hedges clearly suggests we can’t rule out sustained prices at extremely high levels.

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.