The director of risk management with h@ms Marketing Services says fears over possible slaughter hog shortages due PED are driving up hog prices.
As a result of fears over the potential impact of Porcine Epidemic Diarrhea on slaughter hog supplies both cash and futures markets have caught fire.
Tyler Fulton, the director of risk management with h@ms Marketing Services, reports we have evidence of positive tests for the disease from five months previous and futures markets are reacting to speculation of significant losses and as a consequence the cash and futures markets are really taking off.
We’re at a bit of a turning point where we think that the hog numbers are going to start really taking a decline due to earlier losses.
To date we’ve not seen a significant effect from PED however by July it’s anticipated that we could see something in the neighbourhood of four to possibly six, seven, we’ve heard estimates as high as nine percent in terms of a reduction in the herd.
To provide some perspective, our previous all time high in U.S. futures was about 108 dollars per hundredweight and we saw that a couple of years ago.
Today we’re trading the June contract at 118 so that’s almost 10 percent higher than the highest we’d ever seen previously and there’s really strong indications that we could take this an additional five or 10 percent higher depending on how big the hole in marketings is.
Fulton says things look bullish now with hints of record prices right through the summer but this is far from certain so those who haven’t yet taken any forward protection should look at building a position.
He notes USDA’s next hogs and pigs report will provide probably the best estimate of how big or small the hole could be.
