Chronic excess dominates US pig sector

Thursday, 10 June, 1999

By Joanna Newman

CHRONIC oversupply continues to plague the US pig industry and analysts warn that the market could see a repeat of 1998 unless demand picks up substantially.

Producers are clutching at hopes that an imminent political breakthrough in Kosovo could lead to more US food-aid to Russia, which could help shift Americas record-high frozen pork inventories.

Since the 13% drop in lean hog futures during May, the Chicago contracts have managed to hold steady in early June.

The Chicago June lean hog contract closed at 51.1 cents/lb on Tuesday, 8 June, almost unchanged from 51.5 cents a week earlier. There is still considerable nervousness over the short-term outlook for prices.

Futures prices are trading at a substantial premium to the cash equivalent.

Commentators argue that given the poor market fundamentals, futures are more likely to drop to meet cash, to close the differential with the derivatives.

On a more positive note, the jump in beef and cattle prices in recent weeks has made pork more competitive at the retail end of the chain and pork may be able to snatch market-share from beef this summer.

This trend may be encouraging packers to accept higher offers for market-ready pigs.

Slaughterhouses are paying 48.0-48.5 cents/lb on a cash basis for live pigs, up one cent from a week ago.

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