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52

Better Pork

June 2016

H

og prices show a somewhat

predictable seasonal pattern

that repeats itself annually. This

predictability is useful in making pro-

duction, marketing or pricing decisions.

The summer lean hog future con-

tracts established highs in the middle

of March 2016 and have been trending

downward since. Though this trend has

done some damage to the charts, the

downward trend is typical of this time

of year. The normal yearly seasonal low

occurs, depending on the year, between

early May and the end of May. In the

first two weeks of May, the seasonal

tendency for June futures appeared to be

negative.

The anticipated seasonal high should

occur during the summer months. The

date is usually in June or July. In nine

out of 10 years, the summer months

take care of themselves.

The recent surge in pork cutout

values and the run-up in weekly export

sales point to rising U.S. pork exports,

which should bode well for cash mar-

kets. As hog supplies start to decline

during this time of the year, we should

start seeing an increase in pork cutout

values. However, excellent numbers

for pork exports to China have thus far

failed to ignite the cash hog market.

China’s demand could be temporary as

the country rebuilds stocks, but it could

be a significant price factor for the next

few months. Weekly export sales and

shipments of pork soared to marketing-

year highs in the week that ended April

21, 2016, by 150 per cent over the previ-

ous week.

The growth in Chinese pork imports

was exceptional in 2015 and showed no

signs of slowing down during the first

quarter of 2016, according to AHDB,

the U.K. levy board. If we compare

Chinese pork imports in March 2015

and March 2016, we see that China

doubled its pork imports in March 2016

to 114,700 tons.

Unfortunately, the Canadian dollar,

after hitting a low in January (almost

$0.68) soared beyond anyone’s expecta-

tions to a 10-month high of $0.80 (not

seen since June 2015). A new wave of

fund money at work in commodities

since the end of January is finding value

in all commodities, including crude

oil, copper, gold and silver. This has

lifted all commodity boats, provides

the underlying support for a rising

Canadian dollar and offsets a higher

hog futures price. The Canadian dollar

remains overbought, but fund managers

look like they want to continue buying

regardless of fundamentals. In fact, the

funds have added more money in the

first quarter than in any other quarter

over six years. Look for a steady to lower

Canadian dollar in the second quarter

of 2016 as $0.80 cents will act as major

resistance.

BP

Maurizio “ Moe” Agostino is chief commodity

strategist with

Farms.com

Risk Management.

Hog futures should hit their seasonal high

in summer

Chinese demand for pork imports has been strong, but the rise in the Canadian dollar is

offsetting a higher hog futures price

by MOE AGOSTINO

MARKETING