Downward trend as US pigs price swings

By Joanna Levin

LEAN hogs have had a volatile week in the USA, with the Chicago August futures contract swinging from 47.5-51.0¢/lb. The contract closed yesterday (28 July) at 49.25¢/lb, up 0.45¢ from Mondays close but down 0.52¢ from a week earlier.

Having plummeted from 60¢/lb in June, market watchers fear the worst prices are yet to come. They suggest the long-term trend remains downwards because of overproduction.

The availability of cheaper feed with the collapse in the grain markets has failed to turn traders bullish. But cash hog prices for slaughter are approximately 3¢/lb higher than the August futures contract after adjusting for the differences in the contract terms and delivery.

This is an unusual short-term situation that would suggest either a drop in cash or a rally in the August futures to restore equilibrium. The cash hog market is at around 37-39¢/lb at the terminals, little changed from last week.

Pork bellies have also had a roller-coaster week. The Chicago August futures contract surged from 55.60¢/lb last Tuesday to 62¢ in mid-week trading, then retreated to close yesterday at 58.55¢/lb.