Published on: 04:33AM Sep 12, 2008
The chart of the week is US pork production. As one can tell from the chart below, pork production typically increases during the fall. As pork production seasonally increases into the fall the value of the pork cutout (index of pork prices) typically moves lower. Usually somewhere around 10% lower. Thus the coming weeks could be an opportune time to look at long term pork contracts. Why? Well first, a reduction in the swine breeding herd is expected to lead to a downturn in pork production in 2009. And second, eventually, the deferred hog futures contracts could start appreciating if the trade feels that hog supplies could be further reduced by the recent downturn in prices. The trick may be to catch the downside momentum in both contracts before any upward reaction in deferred hog futures occurs. Give us a call if you would like to learn more.