July 17, 2017
Below is how the product market started out and ended the week of 7/14.
*Product Price on Monday 7/10 Price as of Friday 7/14 Change
Loin 95.44 97.78 2.44
Butt 109.43 104.80 (.4.63)
Picnic 68.43 69.42 (.99)
Rib 131.60 119.57 (12.03)
Ham 78.09 78.56 .47
Belly 207.15 205.06 (2.09)
Carcass Cutout $104.93 104.48 (.45)
Base Price $86.43 $86.40 (.03)
*National Live Price $69.45 $68.30 (.15)
**Estimated USDA Hog Slaughter Week ending 7/14/17 2202
Actual USDA Hog Slaughter Same Period Last year 2121
% change year over year +3.8%
As you can see, the carcass value lost .45 cwt., while the live hog price lost only .15cwt.
Now, let’s look at the same time frame and compare what the first three live hog futures contracts did this past week.
Live Hog Contract Monday’s Close Friday Close Net Change for the week
July Hogs 91.48 92.60 1.12
August Hogs 82.00 79.90 (2.10)
October Hogs 69.95 67.18 (2.77)
Looking into next week:
- Last week, Swine Times stated that the product market (loins, butts, ribs , hams and bellies) were topping out. This week’s activity on the pork cut pricing has proven that out. Granted, the carcass cutout lost only .45 cwt. week over week, but rest assured there is a major move down on most all of the primal cuts, bellies included.
- Hams may be a little resistant to downward pressure that will be coming in the near future, probably next week. The loins, butts & ribs will most likely lose $3-$5 cwt. next week, and if not then, they will for sure the following week.
- Swine Times thinks that bellies are in for a $10-$20 cwt. reduction in price next week. Our sources tell us that the belly prices over $2.00 cwt. have succeeded in curtailing demand.
- The producers are still doing a good job marketing their hogs, but our sources also have passed along that the weekly offerings for slaughter-ready hogs have started to increase. This is just in time, as packers are starting to consider adding to their daily slaughters or even a shift on Saturdays going forward.
- The downside to this is that the product market will not be able to clear the retail and processor channels at these levels. It will have to come down in price in order to get demand stimulated.
How do we trade this?
- The August hog closed down 2.62 points on Friday 7/13 at 79.90. This, in the opinion of Swine Times, is a little over done to the down side as they are now $12.50 cwt. below the cash. We would be buying August hogs at these levels and wait to get a 150 to 200 point rally and sell them back. This is just a short term trade so don’t get attached to them.
- Continue to sell October hogs on rallies. If after last week’s break, you take some profit- that’s fine, but then wait to get a rally before selling them back. We have a long time to go to get to October and there is still a lot that can happen. Be patient.
- At some point in the future (probably middle or late August), the product will bottom out and start to turn back and go higher. When this happens, you may want to look at buying a few December hogs to catch a rally. Then be patient and look for a rally in the October hogs to sell them against your December longs. Be sure and watch the packer margins on this trade, especially if packers can maintain a margin and or look to add to their weekly slaughters. This, again, is just another trade, not a campaign. If you can make 100 to 200 points, take it.
- Be alert to any talk of export orders, especially after the product market has had a major break. The overseas buyers will be watching this closely and so should you.
*USDA National Hog and Pork summary
** Expressed in thousand head
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