The Risk of Mixed Market Signals

March 16, 2015 12:00 PM
The Risk of Mixed Market Signals

The scare over PEDv in hogs this past year proved to be less frightening than expected. But the resulting lower movement in the hog market is a lesson to all agricultural producers about what happens when mixed market signals occur.

Power Hour Noon Logo“Our loss from [PEDv] was nowhere close to what we had thought, so consequently, we sent a signal to expand when we should have sent a signal to contract,” explains Don Roose, U.S. Commodities. “[There is] too much pork in the U.S. Our pork production in the first quarter was up 6.5%, the second quarter’s going to be up like 4.5%, the third up almost 8%. For the year, we’re going to be up 5.5%. Total overall meat production’s going to be up 3%.

"But what’s really happened is we’re still in that expansion phase on the hogs because of buildings. It takes a long time. So I think before you can go up, you have to quit going down. You probably have more downside as we move forward yet.”

AgDay Agribusiness Update: Monday, March 16, 2015

As for cattle producers, supplies are tighter and production will be up nearly 1% compared to a year ago.

“Beef, when you go to the store, it just looks lofty compared to pork and poultry,” Roose says. “We have to consume beef domestically. It’s just a real challenge right now. In fact, we think the cattle market’s in the process of trying to top out, maybe it did this last week, in the cash market and the boxed beef. So we think we’re ready for that seasonal decline.”

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