In the face of a possible softening pork demand pork producers are being advised to seize any opportunity to protect themselves during price rallies by forward contracting their production.
A larger than usual supply of slaughter hogs for this time of year, along with uncertainty on the pork demand side has delayed the typical spring rally in live hog prices but producers have started to see signs of improvement.
Tyler Fulton, the Director of Risk Management with h@ms Marketing Services, says we are seeing some of the highest production ever for this time of year and, while demand for pork has been very solid for the past two years, there is some question that it might be softening a little bit.
There’s a lot more competition from chicken and beef right now. Large supplies there have brought prices down on that front. From a domestic demand standpoint there is some pressure there. It’s probably unlikely that we will see the same kind of robust price response that we saw really in the past two years when we hit the tightest supply of the year, because of that extra competition from chicken and beef.
On the export front, that’s probably where most of the uncertainty on the demand side comes from. We still don’t have a NAFTA deal in place and the longer that we go the riskier things seem that a deal won’t be achieved in the short term.
Then of course there’s the tariffs on Chinese imports into the U.S. and consequently the retaliation by China. That’s manifesting itself into a significant reduction in the amount of pork going to China and it has been a pretty big factor in the total export picture of the U.S. right now.
~ Tyler Fulton, h@ms Marketing Services
Fulton suggests producers who have grown accustomed to summer highs in the high 80 dollars per hundredweight U.S. need to adjust their expectations. He anticipates strength over the next month but recommends taking any opportunity to forward contract, particularly for the last half of the year, when the largest supplies are expected to come to market.
