Lean hog futures price action this week may be forming a potential “V” bottom reversal on the daily price chart. Still, with summer-month contracts back at premiums to the cash index the cash market must strengthen to build sustained buyer interest in futures. The latest official quote for the CME lean hog index is $80.08. Recent wholesale pork price strength is encouraging the bulls amid a likely increase in US consumer demand for pork during the grilling season. The seasonal wholesale pork price strength has historically persisted into mid-July. It’s probable that the cash hog and futures markets have put in seasonal price bottoms and that prices will work sideways to higher in the coming weeks.
$54 billion US pork industry is being whipsawed by supply and demand forces
Years of rapid expansion have left the sector oversupplied as demand is waning, costs are rising and new regulations are looming. The Wall Street Journal reports hog farmers are being squeezed and some are even being driven out of business as they lose money at the worst rate in decades. The impact is cascading through supply chains, as businesses from hog farms to processing plants scale back operations and meatpacking companies including Smithfield Foods, Tyson Foods and JBS wrestle with shrinking profits. The turbulence is the result of rapid changes in markets. Booming overseas demand led many producers to expand operations, particularly after hog herds in China were devastated by African swine fever. Trade wars cut into that business, and more recently the strong U.S. dollar has made U.S. pork more expensive abroad.
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