Forward hog contract prices have been stable as of late.
Tyler Fulton is director of risk management with Hams Marketing Services.
"We've seen a fair amount of volatility day to day, but they haven't been trending one direction or the other," he said. "Whatever they seem to lose one day, they'll regain the next day and it's coming not just from a volatile pork complex but also the Canadian dollar is highly volatile as well and that has a direct influence on what forward prices are."
Fulton says we've seen a lot of activity from producers hedging October all the way through the winter and it's motivated by the fact that they're exceptionally good forward prices as compared to normal cash market trends over that timeframe. He adds it's also important to note that we're looking at exceptionally high feed prices, noting margins aren't great, but they're still positive and have some room for a little bit of profitability.
"It's a big threat to the operation if you're only looking at one side or the other in terms of feed versus the price of your output, which is hogs," added Fulton.
Fulton says that the U.S. cash markets are seeing a lot of influence recently from stronger pork prices. In the last four weeks or so, we've seen a rising trend in pork prices with a little bit of variability across different cuts. He says this is a more typical trend that you would see at this time of year.
"Typically we've got hog numbers that are starting to moderate and we also start to see some stronger demand from grilling and so seeing some support in cash pork prices is pretty typical. Given that we have so much influence when producers actually get paid for their hogs, most contracts are referencing wholesale pork prices now. When you see those firmer wholesale pork prices happen it does move into the price for the hogs reflecting that right away."
Earlier this spring we saw a counter-seasonal move of weakness. That seems to be behind us now and with a little bit tighter hog numbers and some good demand, Fulton is generally optimistic that the remainder of June and July should be okay.
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