U. S. hog futures, which slumped to a seven-year low last week as the recession took a big bite out of demand, is seen by some analysts as a buying opportunity. But others are not convinced that the worst is over.
“If I was a speculator, I would probably buy them,” Jim Robb, economist at the Livestock Marketing Information Center, said of nearby CME hog contracts.
“Monday’s pork cutout showed some signs of life. I think in the cash market these relative bargains in the pork complex will start to get some people’s interest,” he said.
Pork prices have been trending lower this summer due to ample supplies and slow sales. In early July, the average pork price, or cutout, dropped to $54.24 per hundredweight, the lowest in six years.
Robb said the drop in hog prices that normally occurs in autumn, when hog numbers increase, may be less severe this year.
Plus, CME October and December futures already reflect lower prices then. The October futures, which are at a seven-year low, traded at 44.95 cents per pound Aug. 12 and December futures at 44.65 cents.
That compares with the August hog futures which dipped to 47.875 cents on August 10, a contract low and the lowest for a spot contract since 2002.
Not everyone is convinced the worst is over. Pork supplies remain large, heavier hogs will mean more pork per hog, and so far pork sales have not improved.
“I would be selling hogs,” said Dennis Smith, livestock broker at Archer Financial. “The hog numbers are consistently larger than expected. The (hog) weights are extremely excessive and the product cannot show any good solid demand.”
USDA on Wednesday reported the average weight of hogs last week in the key Iowa/Minnesota markets was 267.8 pounds, up one pound from the prior week, and up 10.4 pounds from the same week a year earlier.