A surge in hog supply is putting downward pressure on the animals' market value.
Tyler Fulton, director of risk management with HAMS Marketing Service, explains, in the next few months, hog supplies are expected to grow from around 7 percent below last year's levels to only 1 percent under in the next few months.
"We're already starting to see a negative impact on price. It seems packers, for the last several months, have been forced to pay up for those fairly tight supplies," he explains. Now, with supplies increasing, Fulton expects cash prices could drop by 15 to 20 dollars per hundred weight over the next six weeks.
So what has led to the comparative increase in supplies year-over year? "It's one of those things that's kind of unique to hog markets...they call them holes in marketings and more often than not they relate to disease outbreaks," says Fulton. "I think it's probably a combination of that with some poorer feed from last year's harvest. In addition, the time of year, when we start to see cooler temperatures across the Midwest, we really start to see a surge in growth, increasing hog slaughter in the fall months."
Overall, Fulton says the long term prospects for the pork market still look solid for 2011. "I think there's more upside potential than downside, and so producers don't need to be extremely concerned about adding to their forward position or protecting their prices right now."
~ Friday, October 8, 2010 ~