PED Expected to Create Opportunities to Lock in Profits Into Spring 2015

By Bruce Cochrane

The director of risk management with h@ms Marketing Services is confident pork producers will have an opportunity to lock in profitable hog prices this winter and into the spring of 2015 as a result of PED.

After reaching record highs this summer, North American live hogs prices have dropped sharply fuelled by a normal seasonal increase in hog supplies, Russia's ban on North American pork imports and lower than expected losses resulting from PED.

Tyler Fulton, the director of risk management with h@ms Marketing Services, says traders believed we would be looking at a 10% deficit in pork supplies due to PED but, because of heavier hog weights, that deficit has been closer to 5%.

Tyler Fulton- h@ms Marketing Services:
Most people anticipated a drop in the disease outbreaks over the course of the summer because the virus doesn't last very long in hot dry conditions and so it was kind of anticipated that we would see fewer outbreaks and that's generally come to fruition.

What's going to be interesting in the next 2 or 3 months is to what degree those outbreaks ramp back up again or possibly continue to peter out.

Obviously the latter is the preferred option from the industry standpoint because it would show that we're developing ways to deal with the disease.

But from a market standpoint in the event that we do see the number of cases ramp up again as we move into the cooler months the price response of the futures in particular would be positive and I think what we would probably see is some pretty good potential for hog producers to lock in very good profitability for at least the winter and maybe spring months of 2015.

Fulton suggests it's really all what happens with PED so producers need to monitor the progress there and whether or not we see a ramp up in outbreaks.

Source: Farmscape