Lower Than Expected PED Losses Drives Drop in Live Hog Prices

Aug 26, 2014

H@ms Marketing Services suggests lower than anticipated losses from PED rather than Russia's ban on North American pork is the main factor behind a substantial drop in live hog prices.

After reaching record levels this summer, North American live hog prices have dropped sharply.

Tyler Fulton, the director of risk management with h@ms Marketing Services, says traders had expected a deficit in hog supplies of more than 10% due to PED but heavier hog weights have reduced that deficit to about 5%.

Tyler Fulton-h@ms Marketing Services:
Typically what we see is just coming out of the tightest hog numbers of the year.
Typically that's around mid-July and then it slowly kind of climbs back up over the course of following 2 months.

We've definitely seen some of that and typically what markets do in response to that increase in hog supply is they fall from their summer highs and that's definitely what we've seen but I would argue that the drop and we're talking about roughly a 25% drop in wholesale pork prices over the course of the last 6 weeks, that drop is far beyond what we would normally see seasonally.

It's always difficult to partition what factor is causing what price impact but, in general, we're seeing weakness from normal seasonal trends and ideas that the hog supply is not going to be as tight as was anticipated as a result of the PED virus losses.

Fulton acknowledges, while Russia's ban on North American pork has been a factor, hog prices in Canada are determined by the U.S. market and because Russia does not buy a lot of U.S. pork, the impact of the ban has been limited.

Source: Farmscape

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