A Senior Risk Management Analyst with HAMS Marketing Services says pork demand will need to improve significantly to stimulate a recovery in live hog markets.
The U.S. Department of Agriculture’s Quarterly Hogs and Pigs Report, released March 30, indicates the two percent reduction in slaughter hog numbers predicted in the December report has turned into a very slight increase in numbers resulting in downward pressure on prices.
Paul Marchand, a Senior Risk Management Analyst with HAMS Marketing Services, says the higher than projected slaughter hog numbers and reduced slaughter at Olymel in Quebec have added to that pressure.
Demand has to pick up significantly in order for the market to recover. The big news right now would be where does all this pressure come from and there’s been a variety of things happening in the market since the beginning of this year actually, not entirely unrelated to the amount of managed money that’s in the trade right now.
We’re looking at a managed money record short position. As you know, short positions are sell activities and they’re sitting at the second highest amount of short positions on record, the only exception being August 2018. So, the combination of the pressure from managed money or the funds, institutional traders, bearish market sentiment in general, based on the fact that we were looking at higher slaughter levels relative to year ago. The cut-out is under pressure and has been under pressure for awhile, adding to levels that are lower than what the expectations when the narratives at the beginning of the year was we’re going to see less pigs on the marketplace than year ago.
Here now, we have a higher slaughter than year ago, there’s a lot of pork in cold storage, there’s not a lot of demand at the wholesale level, packers don’t have to aggressively bid to secure supplies for their slaughter schedules and we’re really just in a wait and see time right now but demand would probably be the biggest item to look at.
~ Paul Marchand, HAMS Marketing Services
Marchand says the cut-out continue to face pressure and, while exports are good, they are not stellar so there’s really nothing for the market to get too excited about today in terms of a rally.
