Source: Dennis Smith, National Hog Farmer, 4 September 2020, photo credit: Getty Images/US News & World Report (US News Money)
On Sept. 3 both October and December lean hog futures gapped higher and neither contract filled the gap during the entire session. The chart pattern is bullish and showing a symmetrical pattern consisting of a series of higher lows. On Sept. 3 the front month October moved from discount to the CME lean hog index to premium the index in quick fashion. So, what is the board anticipating?
Fundamentally, it appears a combination of factors may be at play. First, average hog weights are declining rapidly. This is likely a function of hot weather and the fact that hogs are on a racto-free diet this summer. In addition, it also appears highly likely that the industry has successfully moved through the backlogged butcher hog supply. Second, my sources report that packers are unsure exactly what the hog supply is moving forward.
The South African Pork Producers’ Organisation (SAPPO) coordinates industry interventions and collaboratively manages risks in the value chain to enable the sustainability and profitability of pork producers in South Africa.