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Pork Profit Maximizer

This bi-weekly market update offers a detailed analysis of various products complete with a discussion of what is happening on the foodservice level. Projections on prices and supplies available in the future are updated on each report.

Current Pork Profit Maximizer

Pork Profit Maximizer 10/16/2017

Hog prices trending higher but ample supplies expected to keep prices in check, offer opportunities to promote pork in 2018.

 

Pork packers have been paying up for hogs in recent days and the turnaround in cash hog prices has bolstered both nearby and deferred futures contracts. The October contract closed on Friday at over 60 cents per pound, 500 points higher than where it was in late September.

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Pork Profit Maximizer Archive

Pork Profit Maximizer 10/16/2017

Hog prices trending higher but ample supplies expected to keep prices in check, offer opportunities to promote pork in 2018.

 

Pork packers have been paying up for hogs in recent days and the turnaround in cash hog prices has bolstered both nearby and deferred futures contracts. The October contract closed on Friday at over 60 cents per pound, 500 points higher than where it was in late September.

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Pork Profit Maximizer 10/02/2017

Supply and price implications from the USDA September 1 ‘Hogs and Pigs’ report.

 

Lean hog futures rallied sharply following the report even though some key numbers were decidedly bearish and well above what analysts were expecting prior to the report. We don’t have a good answer a to why futures rallied on Friday although one can speculate about possible factors.

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Pork Profit Maximizer 09/18/2017

Pork export demand will be key for Q4 as hog supplies surpass record 2016 levels.

 

Pork export volumes were somewhat disappointing in July but the decline was understandable given the sharp increase in pork prices during the month. Global buyers likely recognized that the price increase in the US would be short‐lived, with significant pork volume expected for late summer and fall.

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Pork Profit Maximizer 09/05/2017

Sharp correction in pork belly prices pressures cutout/hog prices lower. Despite an increase in production, prices for other primals remain above year ago levels.

 

Cash hog prices have come under significant pressure in the last couple of weeks due to a combination of seasonally higher hog numbers and a changing retail picture for pork bellies.

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Pork Profit Maximizer 08/21/2017

Hog futures remain particularly volatile on weak cash hog and pork cutout value. Belly prices down sharply as retail prices catch up with record wholesale values in July.

 

Hog futures started last week on a very firm footing as market expectations were buoyed by reports of lower than expected pork production and very good pork export sales. By Wednesday, however, prices took a turn lower as pork belly prices broke sharply lower.

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Pork Profit Maximizer 08/07/2017

Exports of fresh/frozen and cooked pork in June were higher than a year ago, with Mexico demand offsetting the y/y decline in shipments to China.

 

Despite higher pork prices in June, overall exports continued to advance. The rate of growth has predictably slowed down but we expect overall exports to continue to expand for the remainder of the year.

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Pork Profit Maximizer 07/24/2017

Pork demand has been excellent this summer, with pork production up 2% in June and pork cutout rising 10% from the previous year.

 

Hog production has been rising consistently in the last few months although the pork supply increase has been slower than slaughter growth due to lower carcass weights. June hog slaughter was 9.870 million head, 3.2% higher than a year ago. Q2 slaughter total stands at 29.2 million head, 3.7% compared to a year  ago. Total pork production for June was 2.053 billion pounds, about 40 million pounds (+2%) compared to a year ago.

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Pork Profit Maximizer 07/10/2017

Pork Exports up 10% in May and up 13% in the first five months of 2017 on robust  demand from Mexico and Asian markets

 

While overall red meat and poultry exports were higher in May, pork exports were particularly strong, driven by robust demand in Mexico and Asian markets.

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Pork Profit Maximizer 06/26/2017

Seasonally lower supplies and robust pork demand continue to support pork prices in the short term

 

A number of factors continue to support hog prices in the near term, helping propel cash hog values to the highest price for the year. While it is not unusual for hog prices to be higher in the summer (see chart), the run‐up appears to have caught some market participants by surprise.

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Pork Profit Maximizer 06/12/2017

Summer pork demand improves, in part due to higher prices for competing meats. June pork supplies should be at the lowest point of the year.

The pork cutout continues to track higher thanks to robust prices for bellies as well as escalating values for both fat and lean pork trimmings. In the past we have highlighted the relationship between 50CL beef and 72CL pork trim. This quarter the value of 72CL pork trim has been well under trend but that appears to be changing.

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Pork Profit Maximizer 05/30/2017

Cold Storage Update

The latest USDA ‘Cold Storage’ report contained some positive implications for red meat demand in April. Output during the month increased significantly and yet supplies in cold storage at the end of the largely increased in line with the normal seasonal rather than showing a significant buildup. For poultry, the picture is a bit mixed, with some products indicating very robust demand and others still struggling with burdensome supplies.

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Pork Profit Maximizer 05/15/2017

Seasonal Improvement Underway in the Pork Complex. Higher Beef Prices Further Stimulate Pork Demand

In our last update two weeks ago we outlined the expected seasonal improvement for hog and pork prices and, as if on cue, prices have appreciated rapidly in the last two weeks. The calculated 1‐day cash hog index stood at $71.36, $11.36/cwt (+19%) higher than where it was on April 24. Current hog prices are still about 7% under where they were a year ago, which is reasonable given the larger supply of hogs coming to the market.

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Pork Profit Maximizer 05/01/2017

Hog prices ready for their spring rally but large supplies on the ground will help keep prices in check

It is no surprise that hog prices move higher into the summer. Hog slaughter seasonally declines and better demand for grilling items tends to support cutout values. So far this spring hog prices have been quite weak, a function of +7% slaughter, belly prices that have reverted to the mean and a slowdown in export business.

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Pork Profit Maximizer 04/17/2017

February export data shows robust growth but the pace of growth has slowed down in recent weeks. Pork exports in February (fresh/frozen/cooked) were reported at 151,798 MT, 15.4% higher than a year ago and the fourth consecutive month of double digit growth. Mexico remains the most important market for US pork exports at this time. Exports to Mexico in February were 53,067 MT, 10,656 MT (+25%) higher than a year ago and accounting for half of the overall growth in US pork exports for the month.

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Pork Profit Maximizer 04/03/2017

Expanding pork supplies should help keep prices in check through 2017 and 2018

USDA released on Thursday, March 30, the results of its quarterly survey of US hog products. The latest report confirmed what many in the industry suspected, namely that US hog producers continue to expand and pork production in 2017 is on track to post another all‐time record.

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Pork Profit Maximizer 03/20/2017

Hog Slaughter Now Back to Levels Implied by the December ‘Hogs and Pigs’ Report. All eyes on the results of March survey, to be released March 30.

Cash hog prices have been drifting lower in recent days following the sharp run‐up in price during February. The IA/MN negotiated base price last night was quoted at $66.10/cwt, $1.3 lower than the previous day and $2.4 lower than where it was at the start of the month.

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Pork Profit Maximizer 03/06/2017

Ample supplies continue to offer retailers and foodservice operators plenty of opportunities to feature pork this spring and summer.

Lean hog prices rose at a faster than normal pace in late January and February due to a short term squeeze in the spot belly market, excellent demand in both domestic and export channels and hog/pork supplies that tracked under the levels projected by the ‘Hogs and Pigs’ survey. In recent days, however, prices have adjusted lower as some of the factors fueling the rally appear to be losing steam. Pork belly prices, which approached all time record highs at an unusual time of the year, have declined sharply.

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Pork Profit Maximizer 02/21/2017

US Pork Exports Were Key for Reversal in Hog Prices and Remain a Major Driver in the Market Today

The rally in hog prices during the last three months of 2016 helped turn around what was increasingly looking like an economic disaster for US hog producers. Hog prices in October were approaching 40 cents per pound and there was speculation of possibly even lower prices as weekly slaughter bumped up again processing capacity constraints.

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Pork Profit Maximizer 02/06/2017

Pork belly prices spike on tight short term spot supplies, short covering and panic buying but longer term demand is far from certain.

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Pork Profit Mazimizer 01/23/2017

Excellent demand and a modest recent slowdown in growth help firm meat prices at the outset of the new year.

Meat protein supplies have increased rapidly in recent months as lower feed costs have fueled expansion both in the red meat and poultry industry. In the last six reported weeks, red meat and poultry production has averaged almost 95 million pounds (+6.4%) higher than the same six week period a year ago. One has to go back to the start of 2011 to find a comparable growth rate in meat protein supplies. But while the increase in protein supplies does have an effect on the overall food inflation trends (they are down), it also paints with quite a broad brush.

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Pork Profit Maximizer 01/09/2017

Price corrections last summer allowed US exporters to become increasingly competitive in the global marketplace, with double digit export increases registered for all key proteins.

Preliminary data, anecdotal evidence and simply the reality of higher meat prices at a time of supply increases all told us that exports in Q4 were particularly strong. The official data issued from the US Census Bureau and reported by USDA confirmed that conclusion. Exports of all proteins were up in double digits in November, which was critical considering the sharp increase in meat protein supplies during Q4. Average weekly beef production in November was around 505 million pounds per week (carcass wt. basis), +50 million pounds (+11.1%) higher than the previous year.

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Pork Profit Maximizer 12/26/2016

USDA Quarterly ‘Hogs and Pigs’ Report points to continued industry expansion, significantly more hogs in 2017.

Analysts polled ahead of the quarterly USDA Hogs and Pigs report for the most part expected modest supply expansion in 2017. This was evidenced in their expectation that the breeding herd on December 1 would be just 0.2% from a year ago and only modestly higher from the September levels. It was also reflected in the forecasts for farrowing intentions, which were about flat compared to year ago levels. Analysts were expecting the inventory of market hogs to be up about 1.5‐2.8% for the period Jan‐May, in line with the projections for modest increases in both farrowings and pigs per litter during the Jun‐Aug and Sep‐Nov quarters.

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Pork Profit Maximizer 12/12/2016

Hog prices jump on robust ham demand but also due to aggressive marketings earlier in the fall. Exports remain key for prices in Q1.

The pork cutout has outperformed year ago levels despite notably more pork available on a daily basis. Hog slaughter in the last four weeks has averaged 2.414 million head, 3.1% higher than a year ago. Keep in mind that this includes one holiday shortened week and during the three full slaughter weeks slaughter has been over 2.5 million head.

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Pork Profit Maximizer 11/28/2016

Five factors expected to impact the pork industry as pork supplies cyclically increase

We recently took part in a broad discussion with media and industry members and highlighted five factors that we see impacting the pork market in the next 12 months.

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Pork Profit Maximizer 11/14/2016

Ample Grain Supplies Expected to Fuel Meat Supply Expansion through 2017

Crop harvests in the US are coming to an end and it is becoming increasingly clear that this will be a bin‐buster year, surpassing previous record levels by double digits. We were somewhat skeptical of the potential for another record crop this year given early reports of problems in some parts of the country.

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Pork Profit Maximizer 10/31/2016

Higher restaurant sales and improving GDP numbers point to possible demand improvement in the short term in domestic channels.

Before we review the latest restaurant trends, a brief update on trends to this point. Part of the reason for the notable weakness in meat prices during the summer we think can be traced back to the significant slowdown in foodservice business. Restaurant foot traffic trends were particularly troubling, with the index in August dropping to the lowest levels since late 2009.

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Pork Profit Maximizer 10/17/2016

Grain harvest remains on track, with record supplies expected this fall.

Half of the US corn crop has been harvested at this point and the latest USDA data shows we are still on track to harvest a record amount of corn. The October WASDE report expects total corn production in 2016 to be 15.057 billion bushels, 10.7% more than a year ago. The increase is the result of both more harvested acres (+7.6%) and higher yields (+3%).

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Pork Profit Maximizier 10/03/2016

September USDA Hogs and Pigs Survey Points to Capacity Squeeze, Lower Hog/Pork Prices through 2017

USDA released on Friday afternoon the results of its latest ‘Hogs and Pigs’ inventory survey. Coming into the report futures had sold off quite aggressively, largely because market participants were shocked that hog slaughter the last two weeks has averaged +7.8% from a year ago.

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Pork Profit Maxmizer 09/19/2016

Hog value erosion persists as markets contemplate possibility of larger than expected supplies in Q4.

Lean hog futures took another step down this past week and fall prices so far are some of the worst performing in the last 20 years. It is hard to point to one single factor that would explain why market participants have wiped off 800 points (‐14%) since September 1. Rather, there seems to be a confluence of factors that, at least for the moment, continues to pressure prices lower.

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Pork Profit Maximizer 09/06/2016

Meat supplies in cold storage are large and
getting larger.

At the end of July the combined volume of beef, pork, chicken and turkey was 2.419 billion pounds, 2.8% higher than a year ago and 9.7% higher than the five year average. This is the largest supply of meat in cold storage since 2002. We view the latest numbers on pork inventories as somewhat bearish for the fall market, when supplies will continue to ratchet higher. Total pork in cold storage was 599.9 million pounds, 5.3% lower than the very burdensome levels a year ago but still some 10.5% higher than the five year average.

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Pork Profit Maximizer 08/22/2016

Large hog slaughter and slowing exports take their toll on the pork market. Will the situation get worse as we go into the fall?

Hog prices have declined sharply in the last six weeks as markets struggle to absorb the surge in hog slaughter. The situation has been further exacerbated by two critical demand factors for this time of year.

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Pork Profit Maximizer 08/08/2016

Slowdown in pork exports one of the key culprits behind the recent slump in hog values US meat protein supplies are expanding rapidly but it appears, at least for the moment, that export growth is not keeping pace. As a result, more meat has to be absorbed by domestic channels, pushing prices lower in order to clear the market. Pork and chicken exports have been particularly affected.

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Pork Profit Maximizer 07/25/2016

Hog markets delayed response to the June inventory report and the decline in corn prices.

December hog futures closed on Friday at $58.475/cwt, about $2 higher than the previous close but still 12.5% lower than in early June. There are a number of factors that may have contributed to the selloff in the hog complex but we think it largely reflects a realization of the expected bulge in hog supplies this fall and the possibility of exceeding rated packing capacity for a number of weeks in November and December.

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Pork Profit Maximizer 07/11/2016

Beef and Pork Exports Show Robust Growth in May. Chicken Trade Continues to be Hampered by Non Tariff Barriers ‐ US pork exports also showed improvement in May compared to year ago.

Total US pork exports for the month were 458.8 million pounds, 21 million pounds more (+5%) than the same period a year ago. The key for US pork exports remains China, with exports in May to that market pegged at over 90 million pounds, 52 million pounds (+140%) more than the same period a year ago.

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Pork Profit Maximizer 06/27/2016

Pork supply implications following the June Hogs and Pigs Survey

US hog futures declined modestly on Friday even as outside markets sold off quite aggressively following the Brexit vote. The declines may be even more significant on Monday following what we think is a very bearish Hogs and Pigs report. The big story in the pork complex has been speculation about blockbuster China demand and relatively modest increases in pork production in the second half of the year.

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Pork Profit Maximizer 06/13/2016

Does weather grain rally have legs, or will it follow the same path as a year ago?

Both spot corn prices and corn futures have moved up in the last few weeks even as corn stocks remain plentiful and US farmers are expected to plant significantly more corn than a year ago. December corn futures closed on Friday at $4.3350/bushel, up 18% compared to where they were trading in early April. Why the increase? In part we think this reflects the normal weather jitters in the market ahead of the critical July time period when corn pollination is in full swing.

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Pork Profit Maximizer 05/31/2016

Protein supplies bolstered by higher beef and chicken production. Will the pace be sustained in the second half of the year?

We calculate combined beef, pork and poultry production for week ending May 28 to be 1.832 billion pounds (dressed wt. basis), well above year ago levels.

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Pork Profit Maximizer 05/16/2016

Hog futures rally even as cutout gains have been slower than expected.

Strong exports expected to support higher prices into the summer months. Lean hog futures have rallied in the last two weeks on expectations that strong export demand and current hog supplies will help support cash hog values into the summer months. The export story continues to percolate in the markets and we view it as one of the key drivers for the market this summer.

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Pork Profit Mazimizer 05/02/2016

Hog Market Situation

Hog futures have gained ground in recent days following a steady improvement both in the value of the pork cutout as well as higher prices paid for hogs in the cash market. It is somewhat telling from a demand perspective that fat beef trimmings are down sharply at a time when pork trim has gained about 20 cents compared to where it was just four weeks. The gains in the value of pork trim have come even as hog slaughter remains quite large for this time of year. There continues to be a lot of speculation about the role that bigger pork exports to China will have on pork export demand this year.

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Pork Profit Maximizer 04/18/2016

Anxiety builds in red meat markets as hog futures falter and fed cattle prices get little support from boxed beef rally.

As with cattle, the mood in the hog complex is not as buoyant as it was in mid March. Cash prices have failed to advance as rapidly as some expected, in part because wholesale prices have been range bound for the last two months. The pork cutout on Friday was quoted at $78.16/cwt, up less than $1 for the week. Current prices are only slightly higher than they were in mid February and over this period the pork cutout has averaged around $76.3/cwt.

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Pork Profit Maximizer 04/04/2016

USDA released on Friday, March 25, the results of its quarterly survey of hog producers, providing a benchmark for hog supplies as of March 1. The survey looks to capture the number of hogs that will come to market in the next few months, the size of the breeding herd, ongoing productivity improvements and producer expectations for growth in the next two quarters. Below are some of the highlights from the report and implications for pork supplies/prices in 2016 and early 2017.

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Pork Profit Maximizer 03/21/2016

Improved export demand and seasonally lower slaughter helping support the pork cutout

The value of the pork cutout on Friday was quoted at $76.35/cwt, 12.2% higher than a year ago and only slightly lower than the levels we saw in 2013 (we have not included 2014 in the chart given how much prices were skewed by the PEDv outbreak).

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Pork Profit Maximizer 03/07/2016

Tighter hog numbers will support pork prices into the summer, but Q4 capacity constraints remain a concern.

Cash lean hog carcass prices continue to hover in the low 60s, reflecting historically large hog slaughter numbers (+2.25 MM/week) and relatively heavy carcass weights.

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Pork Profit Maximizer 02/22/2016

Exports in the broader context of meat demand

We expect meat supplies in the US to continue to expand in 2016, albeit at a slower pace than in 2015. The latest production numbers from USDA showed combined beef, pork and poultry production in 2015 was 93.6 billion pounds, 2.7% higher than the previous year. Our working forecast is for red meat and poultry output to reach 95.8 billion pounds this year (+2.4%) and then continue to expand to 98.5 billion pounds in 2017 (+2.8%).

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Pork Profit Maximizer 02/08/2016

Exports remain a key demand driver for the US pork industry in 2016.

Review of 2015 offers some insights as to what needs to change December export data became available on Friday and we now have a complete picture of the pork trade flows for all of 2015. We see exports as a key driver for the pork market in 2016, in part because exports absorb over 20% of US production but also because export growth has sustained the overall expansion of the US pork industry in the last 15 years.

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Pork Profit Maximizer 01/25/2016

Hog slaughter expected to be heavy through early March. Higher prices for pork and hogs expected by spring.

Extreme volatility appears to have become the order of the day in livestock trading as market participants struggle with price risk. While market participants have a fairly good handle on beef, pork or chicken supply conditions and outlook, quantifying the impact on demand from another potential global recession is exceedingly difficult and may prove to be a fool’s errand.

 

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Pork Profit Maximizer 01/11/2016

Hog slaughter expected to be heavy through early March. Higher prices for pork and hogs expected by spring.

For the week ending January 9 hog slaughter was estimated at 2.375 million head, 10.6% higher than a year ago. The sharp increase in slaughter was much higher than many expected but it is not a total surprise once we account for the slower than expected slaughter during the holiday weeks. The latest USDA Hogs and Pigs report showed that the inventory of hogs that weight 180 pounds or more as of December 1 was up 5.5% from the previous year.

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Pork Profit Maximizer 12/28/2015

 Hogs and Pigs Highlights 

  • Smaller hog supply vs. projections for spring and summer
  • Breeding herd numbers continue to expand
  • Pigs per litter at record high
  • Hog  numbers will be plentiful by fall of 2016 and risk bumping against capacity constraints
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Pork Profit Maximizer 12/14/2015

Key Points:

  • Meat prices pressured  lower as supplies recover quickly in 2015
  • Supply situation will be less burdensome in 2016
  • Exports remain key
  • Potential for COOL related tariffs is a significant risk for US meat exports in 2016
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Pork Profit Maximizer 11/30/2015

High retail prices continue to limit beef volumes, especially for ground beef. Pork prices also high despite sharp wholesale price correction.

Beef and pork prices at the wholesale level have declined sharply since their peaks in 2014 but that has yet to show up in any significant way at the retail level. The latest retail meat price data collected by the Bureau of Labor Statistics and reported by USDA shows that October retail prices for beef, pork and chicken were higher than the previous month and only marginally lower than last year’s levels.

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Pork Profit Maximizer 11/16/2015

Meat Prices Move Lower on Burdensome Supplies and Inadequate Export Demand

Livestock futures have experienced extreme volatility in the last two weeks but the general trend has been  down. In the case of fed cattle, futures erased almost all the gains made in October and the nearby December live cattle contract is trading near contract lows established at the end of September. Lean hog futures also have collapsed following sharp declines in cash hog prices.

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Pork Profit Maximizer 11/02/2015

Hog prices sharply lower on seasonally higher supplies but also signs of weakening demand for bellies

Hog futures were lower for much of the past week on reports of notably lower prices for both hogs and pork in cash markets. The price of IA/MN lean hog carcass on Friday was quoted at $60.97/cwt, $2 lower than the previous week and down $7.5/cwt from a week ago. This may appear like a very dramatic decline, warranting the futures response but a quick look at the seasonal trends reveals that current prices are very much in line with the normal pullback we see in late October and early November.

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Pork Profit Maximizer 10/19/2015

Monthly exports show impact of a strong dollar, weaker demand in world markets.

In early October USDA released the official August statistics for US beef, pork and poultry exports. There was some surprise that pork exports continued to decline in August despite much talk (and speculation) that exports to China were about to explode. Total US exports of fresh/frozen pork in August were 113,976 MT, 7.6% higher than a year ago but 10.5% lower than in 2013 and 2012.

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Pork Profit Maximizer 10/05/2015

Hog  Supplies  Expected  to  be  Steady  to  Slightly Lower  Through  Next  Summer. Breeding herd remains key for prices in late 2016 and 2017.

 

The  latest  USDA  “Hogs  and  Pigs”  report implies  that hog supplies in 2016 should be  relatively close  to 2015 levels.  Barring any dramatic supply/demand  shocks, we expect  pork  prices in 2016  to  be  only  modestly  higher  than  in  2015.

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Pork Profit Maximizer 09/21/2015

Hog markets have been trending higher in the last  few  weeks  (despite  all  the volatility), buoyed by stronger than expected cutout values  and  expectations  that  demand  this  fall should  be robust enough  to  support  the  seasonal surge in slaughter numbers.  The nearby (October)  hog  futures  contract  closed  on  Friday  at  $71.05/cwt,    the  highest  point  since early  June.  At  this point gone  are  projections  of
hog prices in the mid 50s that  were  being  entertained  in mid  July—pork prices  have  simply  been much  stronger  than  expected.  The pork cutout on  Friday  was  slightly lower but it is still hovering  in  the  low  80  cent range,  providing  packers with good margins.  Part of  the  reason  for  the +350  point  jump  in  hog futures  this  week were reports that higher prices were being paid for hogs in the cash market.

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Pork Profit Maximizer 09/07/2015

Pork  Exports  Higher  than  Year  Ago  in  July, Expected  to  Be  Stronger  in  Second  half  of  2015

USDA  released  on  Friday  its  latest  update  on  monthly US exports and  the  numbers  continued to paint a relatively bearish picture for US export meat demand.

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Pork Profit Maximizer 08/24/2015

Pork Market Situation and Outlook for Fall Supplies and Prices
Livestock futures have been even more volatile than usual this August as market participants struggle to balance reports of weakening global economic growth (a key demand driver) while meat supplies continue to expand and are expected to be even higher in 2016. Hog futures have been dramatically lower so far this year but recently fed cattle and feeder cattle also have been sold quite aggressively as market participants turn increasingly bearish.

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Pork Profit Maximizer 08/10/2015

Pork exports lower in June but expectation is for significant recovery in the second half

Total exports of fresh/frozen and cooked pork in June were 142,658 MT, just 0.6% higher than the same period a year ago. The volume of pork shipments was disappointing given the surge in overall pork production compared to last year and the sharp reduction in prices. While some markets, such as Mexico, have clearly taken advantage of the lower prices and have increased purchases, shipments to Asia remain soft and the lack of Russian business clearly has had a significant impact.

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Pork Profit Maximizer 07/27/2015

Big increase in cold storage stocks and expected large slaughter this fall should offer plenty of opportunities to feature pork this fall.

Total supplies of beef, pork, chicken and turkey in cold storage at the end of June were 2.280 billion pounds, 16.9% higher than a year ago and 7.1% higher than the five year average.    Stocks declined 1.3% from the previous month in line with the normal draw down that we see in June following the big Memorial Day weekend.

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Pork Profit Maximizer 07/13/2015

Market fears wall of pork in Q4, discounts hog prices for later this fall and winter

Lean hog futures have declined sharply in recent days as market participants see ongoing large weekly slaughter this summer as an indicator of much larger supplies in the fall.    Recent trading has for the most part erased the gains made after the latest USDA Hogs and Pigs report.  The June 1 inventories of the breeding herd as well as the farrowing intentions for Sep‐Nov were smaller than expected.

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Pork Profit Maximizer 06/29/2015

Latest Hogs and Pigs Report Confirms Supply Recovery – But Growth Trend Likely to Be Slower in 2016

USDA published on Friday, June 26, the results of its quarterly survey of hog and pig operations and, for the most part, the results indicated that short term supplies are expected to be relatively close to what the market was expecting. The two big surprises in the report relate to expected supplies in 2016. We expect the report will be viewed by futures markets as neutral for 2015 futures contracts and moderately bullish for 2016 contracts, especially April, June and July of next year.

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Pork Profit Maximizer 06/15/2015

Poultry Market Disruptions and Implications

For the first time in more than two months there were no confirmed cases of Avian Influenza in commercial poultry operations last week. Since last December, however, there have been 222 cases that have affected some 47 million birds, most of them egg laying chickens and turkeys. Through June 12, USDA reported AI had affected a combined 7.8 MM turkey, 31.4 million table egg laying chickens and 5.8 million pullet chickens (chickens grown for future egg production). Most of the losses have happened between late March and early June. There have been no outbreaks in broiler operations. Because of the disparate nature of the AI outbreak in the poultry sector, the price response across the various segments has been quite different.

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Pork Profit Maximizer 06/01/2015

Ham market seasonality, turkey breast effect and price targets for summer and fall

Ham prices have recovered from the post Easter price decline. A number of factors we think helped the ham market return to more normal trading levels. End users who were sitting on the sidelines as the market collapsed returned to a more normal order flow in May. We also think export business has improved. April pork data will be released next week and we expect to see a significant increase in US pork shipments to Mexico in April, with hams contributing a large part of that growth.

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Pork Profit Maximizer 05/18/2015

Hog Markets Continue to Gain Ground as Memorial Day Needs Come into Focus

 
Hog futures have mounted a significant rally in the last few weeks on improving seasonal demand in retail markets, good export sales and a return to a more normal order flow from processors. Since late March, the June lean hog futures contract has gained $11/cwt (+15%). Hog prices in the cash market have fared even better. The IA/MN lean hog carcass price (wt. avg basis) closed on Friday at $81.85/cwt, $1.6 higher than the previous day and up some $26/cwt (+45%) compared to where it was trading at the end of March.

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Pork Profit Maximizer 05/04/2015

Seasonal Demand Improvement Supports Cash Hog Markets…But For How Long?

Cash hog and pork prices have gained ground in recent weeks and this has underpinned the rally in hog futures since late March. The pork cutout on Friday was higher once again. USDA quoted the overall cutout at $73.86/cwt, 58 cents higher than the previous day and $3.9/cwt higher than a week ago. The pork cutout still is about 35% lower than a year ago but year over year comparisons will provide a distorted picture for the next few months given the unusual situation created by PEDv last year.

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Pork Profit Maximizer 04/20/2015

Bird flu could create additional headwinds for meat markets in the spring and summer of 2015

Since April 1, there have been 18 cases of Highly Pathogenic Avian Influenza (HPAI) identified in the US. In most cases HPAI has affected turkey farm but the latest case was in a commercial broiler layer flock in Jefferson County, Wisconsin. This is the second such case in a commercial chicken operation and the first case in a chicken operation location in the Mississippi flyway. Given the spread of HPAI along the Mississippi flyway, one could argue that it was just a matter of time before cases of HPAI would be found in some commercial chicken operations.

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Pork Profit Maximizer 04/06/2015

With PEDv behind us, hog industry expansion is back on track

USDA released on Friday, March 27, the results of its quarterly Hogs and Pigs inventory, showing a significant increase in the number of hogs going into the spring but also a smaller than expected increase in the size of the breeding herd. The reaction in the futures markets was predictable. The large inventory numbers were already built into the prices for nearby contracts so there was limited impact there. Deferred futures contracts received some support from the lower breeding herd number and lower than expected pig crop for Jun-Aug.

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Pork Profit Maximizer 03/23/2015

Spread of Bird Flu Likely Bearish for Prices in the Short Term
There have been fourteen cases of highly pathogenic avian flu in the United States this year. So far the impact on broiler and turkey prices has been minimal but that could change quickly as key trading partners announce partial or full bans on US poultry imports. There has been some confusion among market participants as to what impact the spread of avian flu in key production areas could have on the broiler and turkey markets.

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Pork Profit Maximizer 03/09/2015

Pork prices continue to drift lower
Lean hog futures were lower this week on continued weakness in cash hog markets, large slaughter volume and a steady erosion in the pork cutout. Hopes of a market bottom, which permeated trading the previous week, appear to have been premature. For the moment, there appears to be a lot more pork in the market than previously expected and lower prices are required to absorb this additional supply. Inclement weather across heavily populated areas in the Northeast may be a short term factor.

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Pork Profit Maximizer 02/23/2015

Pork supply increase overwhelms the market, offers retailers hard to beat spring bargains

Hog supplies remain much larger than anticipated and when combined with heavy carcass weights and limited exports, this has created a glut of pork that domestic markets are having a tough time absorbing. Extreme winter weather across heavily populated areas of Eastern and Southern US has battered consumer meat demand, particularly at foodservice, adding to the downward price pressure.

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Pork Profit Maximizer 02/09/2015

Exports Will Be a Key Driver for Pork Market in 2015

Pork exports were seasonally higher in December but overall volume remained significantly below levels we have seen in recent years. According to the latest USDA data, total shipments of fresh/frozen and cooked pork on a product weight basis were 135,790 MT in December, 11.4% lower than a year ago. This was the seventh consecutive month of lower y/y pork export sales.

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Pork Profit Maximizer 01/26/2015

Outside market influence continues to impact livestock markets. Fears of demand slowdown persist

Cattle and hog futures continued to retreat last week as market participants worry that the global economic growth stagnates in the next 12 months. Mounting problems in key markets could dramatically impact demand for meat protein at a time when producers already have begun to ramp up production.

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Pork Profit Maximizer 01/12/2015

Prospects of higher domestic supply availability pressures meat prices.

Poultry production is now significantly above year ago levels and combined with a decline in US meat exports this has dramatically changed meat supply availability in the US. Prices for a number of products, particularly pork and chicken are well below levels established just a few months ago. Weekly poultry production data is reported with a one week lag but we estimate ready to cook broiler production last week was 772 million pounds, 8% higher than the previous year.

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Pork Profit Maximizer 12/29/2014

Hogs and Pigs Survey Shows Adequate Supplies this Spring, more Hogs in 2016

The results of the latest USDA Hogs and Pigs report confirmed what many in the trade already suspected—hog supplies have recovered following the devastating impact of PEDv. What is more, the producer response to high death losses and lower feed costs has been to increase the size of the breeding herd.

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Pork Profit Maximizer 12/15/2014

Tremors in Broader Commodity Markets Pressure Livestock Complex Lower

Both cattle and hog futures were down sharply last week, tracking a dramatic sell-off in the crude oil market which saw crude prices drop to $57/barrel, the lowest level since 2009 (see chart). While on the face of it lower oil prices could be construed as supportive of US consumer spending, and hence meat demand, there are broader implications from the recent  oil price decline which have caused market participants to adopt a more defensive stance.

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Pork Profit Maximizer 12/01/2014

Hog market following seasonal as panic subsides

Nearby lean hog futures continued to move lower this past week on increasing pork supplies and weak wholesale pork values. Lean hog carcass futures have declined sharply from the levels established earlier in the year, largely due to the easing supply crunch and also significantly lower prices in the cash hog market.

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Pork Profit Maximizer 11/17/2014

Pork Market Trends
Lean hog futures also gained over 500 points in the last few days – the question is how sustainable are current gains given the steady
decline in the value of the cutout since early October. And, if pork prices are indeed poised to move up, what will/should lead the charge.

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Pork Profit Maximizer 11/03/2014

Lean hog futures traded lower this week and the nearby December contract is now down almost $8/cwt (-8%) for the month of October. While hog futures tried to rally late last week and early this week, gains proved to be short lived given continuing weakness in wholesale pork markets and sharp declines in cash hog prices.

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Pork Profit Maximizer 10/20/2014

Lower feed costs set the stage for higher chicken and pork supplies in 2015

The latest USDA Supply/Demand reports (WASDE) confirmed what many in the industry were expecting – record corn yields and a substantial increase in the supply of corn and soybean meal available for the 2014-15 marketing year. Corn ending stocks, basically corn that is not sold and carried over into the next year, now are projected to be well over 2 BILLION bushels, a 150% increase from the tight supply levels of just two years ago.

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Pork Profit Maximizer 10/06/2014

More hogs are on the way but don’t expect a market crash anytime soon.

On Friday, September 26, 2014 USDA issued the results of tis quarterly survey of US Hogs and Pigs operations. The survey measures inventory levels as of September 1 as well as producer expectations of hog supplies in the next two quarters. USDA also revised some of its earlier estimates so that they match the slaughter data for the Jun-Aug quarter.

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Pork Profit Maximizer 09/22/2014

Cheap corn should spur hog production … but when?

There is plenty of anticipation ahead of the upcoming USDA Hogs and Pigs report (September 26), especially considering the dramatic supply hole that developed in the spring and summer of 2014. Corn prices are now approaching $3 per bushel, a 60% decline from the highs established in the fall of 2012.

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Pork Profit Maximizer 09/08/2014

July data show significant slowdown in beef and pork export shipments.

Pork: Exports of fresh/frozen and processed pork in July were 133,906 MT, 1.6% lower than a year ago. The decline in exports would have been larger if not for a surge in pork exports to Russia, before the ban was announced in early August.

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Pork Profit Maximizer 08/25/2014

Hog prices drop on softer demand and expectations of increasing hog numbers in fall and winter months. Lean hog futures have declined sharply since hitting an all-time record high in early July. The decline has accelerated in recent days, as sharp declines in cash hog prices have caused market participants to unwind long positions across the board.

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Pork Profit Maximizer 08/11/2014

June beef and pork exports were once again higher but the pace of growth has slowed down as high prices push world buyers towards other markets.

US export shipments of beef and pork were higher in June despite sharply higher prices in the first half of the year. Strong export demand has been part of the reason for the firm meat protein markets and the latest export data was a confirmation of that trend.

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Pork Profit Maximizer 07/28/2014

USDA released on Tuesday (July 22) the results of its monthly survey of about 800 public and private refrigerated warehouses and the results will viewed as bullish for cattle and, to a lesser extent, for hog futures. Below is a recap of the highlights from this latest report and implications for meat market trends in the short to medium term.

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Pork Profit Maximizer 07/14/2014

With profitability back in the meat business, growth is not far behind

The good times are back for US red meat and poultry producers. Record high prices for cattle and hogs and a sharp decline in feed costs has put most producers back in the black following a a number of years of poor margins and breeding stock liquidation.

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Pork Profit Maximizer 06/30/2014

USDA Hogs and Pigs Report: Bullish on the face of it…but plenty of questions as well.

The latest USDA Hogs and Pigs report will likely be viewed by futures markets on Monday as largely neutral for nearby contracts but bullish for the winter and spring markets (Dec, Feb and maybe April).

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Pork Profit Maximizer 06/16/2014

Tight supplies and better demand push red meat and poultry prices higher

Rising prices and high volatility have been the primary themes in meat complex so far this year and the past two weeks were a case in point. Fed cattle futures jumped by as much as $10/cwt in a matter of days and hog futures for the summer months established new all-time contract highs.

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Pork Profit Maximizer 06/02/2014

May 1 Cold Storage Stocks Sharply Lower

USDA released on Thursday, May 22, the results of its monthly survey of refrigerated warehouses and the results were for the most part supportive for meat prices going into the summer months. The survey data was particularly bullish for beef and chicken, with overall stocks of these two commodities down sharply compared to both last year and the five year average. Pork stocks also were lower than a year ago but we did not see the rate of depletion that we saw in March.

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Pork Profit Maximizer 05/19/2014

Export market demand and impact on red meat and poultry prices

Global demand for US beef, pork and poultry products remains strong and it has been one of the factors underpinning the sharp price inflation across many meat protein items. It is no coincidence that products showing the biggest price increases so far this year (beef briskets and short plates, pork ham and trimmings) tend to be items that are big export items.

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Pork Profit Maximizer 05/05/2014

After panic buying, spot pork market is better supplied…but for how long?

Pork prices rose sharply in March and early April as short spot supplies and speculation of dramatic cutbacks during the summer months caused a frenzy inpork product markets. The spike in pork prices also should be seen in the context of record high beef prices, especially in the price of retail staples such as ground beef and round cuts.

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Pork Profit Maximizer 04/21/2014

The pork cutout has been declining steadily in the past two weeks although the overall cutout value towards the end of last week seemed to stabilize around $121/cwt. USDA quoted the Friday (April 18) cutout at $121.34/cwt, down $3.42/cwt compared to the previous Friday and down $12/cwt (-9%) from the peak established April 2.

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Pork Profit Maximizer 04/07/2014

Hogs and Pigs survey paints a less bullish picture than private analysts, adding to volatility in pork market.

The results of the March USDA Hogs and Pigs inventory survey had bearish implications for the summer hog market.

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Pork Profit Maximizer 03/24/2014

Sharp drop in hog slaughter and panic buying causes spot market supplies to dry up.

The sharp run-up in pork and beef prices has caught a lot of market participants by surprise and they are now scrambling to catch up.

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Pork Profit Maximizer 03/10/2014

Record pork prices amidst uncertainty and fear about summer market top

Pork prices established an all-time record high this week as the pork cutout was quoted by USDA at $111.99/cwt, 43% higher than that previous year. Current prices have now surpassed the all-time record established last June at $111.33/cwt.

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Pork Profit Maximizer 02/24/2014

Fear reigns supreme – Beware the volatility

Volatility is the name of the game in the meat protein markets at the moment. Wholesale prices for a number of beef items reached all- time record highs in January only to pull back sharply just as quickly. Pork prices are also trending higher and currently hog futures, sitting at all-time record levels for the summer months, imply significantly higher prices for a number of items, particularly bellies, hams and trimmings.

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Pork Profit Maximizer 02/10/2014

The latest USDA export update for the most part painted a positive picture for both beef and pork trade. Below is a recap of the highlights from the December report, a summary of exports for the year and implications for 2014.

Exports of fresh/frozen and cooked pork in December were pegged at 153,257 MT, 6.6% higher than the previous year. This was the first year over year increase in pork exports since July and the biggest y/y increase for 2013.

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Pork Profit Maximizer 01/27/2014

Low beef stocks, ample chicken supplies and a whole lot of bellies – that’s a two second recap of the latest USDA Cold Storage monthly survey.

Total pork inventories increased in December, somewhat of a bearish signal given the tendency for stocks to decline going into the year end holidays.

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Pork Profit Maximizer 01/13/2014

Export Update

Pork exports have been weak for much of this year, in part reflecting high pork prices but also due to limited demand from key markets in Asia and the closure of the Russian market. Total US pork exports in November were 152,427 MT, down 6,700 MT or 4.2% compared to a year ago.

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Pork Profit Maximizer 12/30/2013

Spread of PEDv limits hog expansion and pork supplies for 2014

There was plenty of anticipation ahead of the USDA quarterly Hogs and Pigs report, issued on December 27, 2013. The number of PEDv cases has escalated since September and futures markets have built significant risk premiums into forward contracts in anticipation of tighter pork supplies.

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