H@MS Marketing Services blames near record inventories of pork for lower than anticipated live hog prices this spring.
Typically we experience a seasonal rally in live hog prices which coincides with a reduction in hog supply and an improvement in North American domestic demand due to grilling season.
Tyler Fulton, the Director of Risk Management with H@MS Marketing Services, observes this year is shaping up to be atypical, partially due to a reluctance on the part of retailers to drop prices to move more volumes.
Tyler Fulton-H@MS Marketing Services:
What's actually happening this year is we're seeing an inventory backlog develop so that now the latest cold storage report reveals about a 20 percent increase in pork inventories than we saw at this time last year and, in fact, actually inventories are up almost at all time record high levels.
Now what simply needs to happen is to move that volume of pork that's currently in inventory, typically you would rely on prices to decline to move more volume.
Given that we expect to see a further reduction in the actual live hog supply, what we're hoping is that we can move more of that volume without price concessions.
So going forward into the weeks and months of the summer we're hoping that we can maintain current price levels but move through that inventory of pork and just simply maintain the price levels that we've achieved so far.
Fulton acknowledges live hog prices are in the upper range of where they typically would be at this time of year when you look at the past five years, but much lower than what had been expected a couple of months ago.
He notes some U.S. weekly slaughter levels have exceeded year ago levels by five percent which wasn't expected and is a concern but, while he's confident that increase is manageable, he encourages producers to consider that when planning risk management activities to the end of 2012.
By: Bruce Cochrane.