We’ve entered the fourth quarter of the year, when traditionally hog inventories are at their highest levels - and when prices are under the most pressure.
The hog market was starting to decline late in the third quarter. On Aug. 30, the December lean hog futures price topped at $83.60 per hundredweight. By mid-September, that price had dropped by more than $12. Prices held there for about a week, then a surprising USDA Hogs and Pigs report gave prices a needed boost. USDA estimated the nation’s hog inventory was 4% smaller than the year before.
“Thank goodness for that Hog and Pig report,” said Toni Dunker with Advance Trading. “We would normally walk into this time frame and be concerned about packer space and product value. It’s given producers another opportunity to be looking at next year, since we’ve rivaled back up to those July highs that we have for the next summer months.”
Dunker recommends farmers be proactive with the pricing opportunities they’ve been offered. Prices are expected to move higher next year, with June and July contracts trading in the mid-90s and both May and August in the low-90s.
“I know we all get tired of hearing about this, but with the events that have unfolded with ASF in our hemisphere, that has to be in the back of our minds at all times," she said. "So, we have to proactively protecting these prices, especially when they get to these levels where we can lock in profitable prices."
Demand for pork continues to be strong, both at home and overseas. According to the U.S. Meat Export Federation, the value of pork exports in the first seven months of the year are 8% better than last year. That strong demand is showing itself at a time when fewer hogs are going to market. Hog slaughter statistics each week show smaller inventories than the year before, including last week’s movement, which was 88,000 fewer than a year ago. That’s about 18.5 million fewer pounds of pork, just in one week’s time.
Prices are going to need to stay strong given the outlooks for grain and soybean prices and the resulting high feed costs farmers face. “I’m looking at crude oil being at a seven-year high,” she said. “And there really hasn’t been a lot of disconnect between corn and crude oil in the past several years. As a livestock producer, the more knowns I can get by locking those inputs in and having a cash price that I know. My emphasis is always: if we have a known, we can manage that known somehow, but if we have an unknown, then we’re dealing with a lot of issues beyond agriculture that impact these prices.”