China’s Culling a Boon to the Pork Industry: Hog Futures

Hog futures should be finding solid support as news of China’s culling of their sow hog-herd by 19% is predicted to provide support to the global pork industry for some time to come. Hog futures are actually down .20 cents per pound today currently trading at $68.95 (CWT) at the Chicago Mercantile Exchange.

The culling of the Chinese herd over the past year and a half has been recognized as one of the biggest in history and, get this, said to be equivalent to the loss of the more recent Canadian, Mexican, and US herd culling – combined! The effect of this action in China is now apparent in the global pork industry with tightened pork supplies and higher prices.

Gerry Plotkin, a Senior Market Strategist for R.J. O’Brien in Chicago, had this to say regarding the fundamental assessment of the hog futures markets, As news spread about this event, over the past two months the near-by hog futures contract has risen by $10 (CWT) a pound.” Plotkin adds,Higher stable pork prices also positively affect the pork producer’s margins as well as recovery of the hog-to-corn price ratio for these producers. In the meantime, the hog herd rebuild is still clearly underway for the benefit of the consumers too.”

Hog futures trend is technically up at this time, but looking at a bigger picture this market has actually been trading sideways since February. Hog futures could breakout to the upside with a sustained price move above $72, however, and if it happens it could be soon.

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