Pork Supply Weighs on Hog Futures

Higher feed costs because of drought are sending more than enough hogs to slaughter.  Hog futures have responded today by dropping for the first time in three trading sessions on the outlook of mounting US pork supplies.

The USDA has reported 6.6% more hogs delivered to meatpackers last week than the week before, with weights 2% higher than in 2011.  I would venture to say these hogs were raised primarily at a time when feed costs were 40% lower just two months ago.

Chris Hildebrand, vice-president of trading for HighGround Trading Group in Chicago, had this to say regarding the current hog futures situation, “We are looking for lower hog (futures) prices over the intermediate term as feed costs are pushing farmers to move more hogs to slaughter.”  Hildebrand added, “Unlike the cattle markets, we are seeing heavier weights in the hogs which should produce a marked surplus over the next couple of months leading to lower prices.”

Hog futures seem to be in a delayed trading pattern behind it’s cattle counter-part contract as cattle futures were in the very same predicament just a month ago.  I suspect hog futures will bottom out and rally on lack of supply in the not-so-distant future.

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