Speculators have gone "Hog Wild" as Lean Hog futures continue their bull run. Since major lows were made back in August of last year at just under $44.00 per hundredweight, front month Lean Hog futures prices have nearly doubled in price. This is likely due to the fact that the Hog industry is feeling the effects of the economic crisis which occurred last year when lower protein demand caused producers to liquidate breeding herds, which in turn is causing market-ready hog supplies to remain tight.
Meatpacker's pork profit margins remain strong, which is encouraging producers to bring hogs to market even though average hog weights are lighter than normal, which is keeping production totals light. Pork cut-out values have moved above $90.00 for only the second time in history and are the highest since the peak of the great commodity bull market back in the late summer of 2008. High retail pork prices are making some traders nervous that consumer demand for pork will start to decline, as buyers look for alternatives and cheaper cuts of meat for their protein needs.
However, large speculative accounts seem to have little concern about futures retail demand, as their net-long position in Lean Hog futures is just below record levels. The most recent Commitment of Traders report shows large non-commercial traders holding a net-long position of 52,654 contracts as of April 20th. Although is this just over 5,000 contracts below the record levels set the previous week, Tuesday's sharp rally may encourage fresh speculative buying back into the market, as last Friday's sharp reversal day may have put a short-term bottom in place.
Improvement in consumer confidence readings is also viewed as a positive for pork demand, as a brighter economic outlook by consumers may assure that there will be plenty of pork on the barbecue as we move closer to the Memorial Day holiday in the U.S and the unofficial start of the summer grilling season.
Photo Caption: A trader in the hog futures pit of the Chicago Board of Trade signal orders in Chicago, Illinois.
Photo Credit: Reuters
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