(Alice McFarlane/farmnewsNOW Staff)

By Alice McFarlane

Pork markets

Volatility in the hog markets

Aug 13, 2019 | 1:24 PM

Large hog supplies and uncertain Chinese trade have caused turbulence in the hog markets.

HAMS Marketing Services Director of Risk Management Tyler Fulton said the trade situation with China continues to add a higher level of uncertainty to an already tense North American hog market.

He said with large U.S. hog supplies and increasing production the value of any hogs not under contract is dropping rapidly. But, on the pork side, the past two weeks or so have seen added support.

“That’s led to a divergence in cash hog pricing because some producers are referencing that pork price that packers are selling for while others that don’t have a secured contract, those values are dropping very sharply,” Fulton said. “There’s a great deal of uncertainty and it’s a unique circumstance to see these markets moving in opposite directions.

Fulton said most traders would view the Chinese situation as being the only way to avoid really significant losses in pig prices because of the abundant supply of hogs, particularly in the United States.

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“With these barriers to being able to capture those opportunities in China that relate to the losses due to African Swine Fever, we find ourselves in a position where we know fundamentally that there’s opportunities there,” Fulton said. “But there’s just a huge amount of uncertainly as to when or if we as the North American hog industry are going to be able to capture that to be able to secure some of those extra sales because of that uncertainty on the trade agreements with China.”

In in terms of price protection, Fulton said the majority of producers are well positioned moving toward the fourth quarter and at current prices he recommends holding firm unless there is a 10 per cent move in some of the 2020 contracts.

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alice.mcfarlane@jpbg.ca

On Twitter: @AliceMcF