The December lean hog futures contract prices have been rising in November, and "we could end the year above $60," says Brian Roe, Associate Professor at Ohio State University. "This would be only the third year that has happened."
Closing the year at or near current futures price levels will occur if demand, including exports, remains pretty constant and hog supplies meet expectations. "The futures market seems to be satisfied at this point that this will happen. Cash at $59 to $60 carcass weight and the December futures at or near $63 are pretty well in line. It seems that cash may be leading futures," says Roe.
Continued export increases and good domestic demand over the holidays would support both the futures and cash markets. Exports remain key, however. About 13 percent of U.S. live hog production is now exported via product. Last year, that number was closer to 10 percent. Without that boost in foreign demand, the price picture would be pretty unpleasant, says Roe.
"Looking into the future it appears that exports need to retain growth or at least maintain current levels to expect 2006 prices to hold at current levels," he adds. "Futures offer an opportunity to price well into next year at prices near or above $45 live weight. Using current futures values through December 2006, producers with a breakeven around $40 per hundredweight would net more than $13 on a 270-pound market hog." Roe says, it appears that the futures market expects pork demand to hold; it also appears that there are no expectations of significant expansion in the North American swine herd.