Despite a the hog market low during the week of Thanksgiving, Purdue University marketing specialist Chris Hurt expects hog prices to improve in December.
Hurt forecasts prices to hang around the $45 to $47 range for the live weight equivalent for 51% to 52% lean carcasses. He says further strength is expected in the winter, with prices averaging near $47 in the first quarter, $48 in the second quarter, and $49 in the third quarter.
Lean hog futures traders are also confident of cash hog price recovery, he notes. Futures prices through next August provide hedging opportunities that are currently higher than projected cash prices. In addition, with corn and soybean meal prices now looking weak, costs of production through next summer are expected to be about $38 to $39 per live hundredweight. This means a hedging profit potential of $10 to $12 per live hundredweight.
"These hedging profits should be strongly considered given the possible opening of beef trade to Asia," says Hurt. "In addition, the Dec. 28 release of the Hogs and Pigs report by USDA is expected to show winter farrowings up 2% and the beginning of a U.S. breeding herd expansion of perhaps 1 to 2%.
"Any greater buildup in these numbers may make current hedging returns glow with missed profit opportunities," he says.