Mon, 02 Oct 2017
US - H@ms Marketing Services is advising pork producers who have less than 50 per cent of their production forward contracted to be watching for opportunities to shore up their hedges, writes Bruce Cochrane.
The US Department of Agriculture's Quarterly Hogs and Pigs Report, released last week, indicates the US market hog inventory increased by three per cent from one year ago while the breeding inventory increased by one per cent.
Tyler Fulton, the Director of Risk Management with h@ms Marketing Services, says the three new slaughter plants now operating in the US are capable of absorbing the increased volumes of hogs but demand for pork will need to remain strong to keep the prices of those hogs from falling.
We are going to be looking at US daily hog slaughters that exceed 2.6 million.
That's easily a record, beating the old record by approximately 100 thousand hogs and so we are very much reliant on being able to move this extra supply, this extra production.
The question that really comes to a head is at what price are we able to clear it?
If demand continues to show great growth as it has for the last several months, then it's possible we won't have to make any massive price concessions.
What I think is most likely to happen is packer margins will shrink so that packers will probably make a lot less than what they were for example last year at this time and they will be more competitive for live hogs which will narrow up those margins.
But the hope is that the effect of the heavy supply wont really be felt by producers as much simply because we've got this extra competition by three new packers.
Mr Fulton recommends producers who are less than 50 per cent hedged for the November-December time frame look for opportunities to shore up their hedges.
But, he notes, a lot of producers are already well covered for the fourth quarter.