Better Pork - June 2016

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52 Better Pork June 2016
H og prices show a somewhat
predictable seasonal pattern
that repeats itself annually. This
predictability is useful in making pro-
duction, marketing or pricing decisions.
The summer lean hog future con-
tracts established highs in the middle
of March 2016 and have been trending
downward since. Though this trend has
done some damage to the charts, the
downward trend is typical of this time
of year. The normal yearly seasonal low
occurs, depending on the year, between
early May and the end of May. In the
first two weeks of May, the seasonal
tendency for June futures appeared to be
negative.
The anticipated seasonal high should
occur during the summer months. The
date is usually in June or July. In nine
out of 10 years, the summer months
take care of themselves.
The recent surge in pork cutout
values and the run-up in weekly export
sales point to rising U.S. pork exports,
which should bode well for cash mar-
kets. As hog supplies start to decline
during this time of the year, we should
start seeing an increase in pork cutout
values. However, excellent numbers
for pork exports to China have thus far
failed to ignite the cash hog market.
China’s demand could be temporary as
the country rebuilds stocks, but it could
be a significant price factor for the next
few months. Weekly export sales and
shipments of pork soared to marketing-
year highs in the week that ended April
21, 2016, by 150 per cent over the previ-
ous week.
The growth in Chinese pork imports
was exceptional in 2015 and showed no
signs of slowing down during the first
quarter of 2016, according to AHDB,
the U.K. levy board. If we compare
Chinese pork imports in March 2015
and March 2016, we see that China
doubled its pork imports in March 2016
to 114,700 tons.
Unfortunately, the Canadian dollar,
after hitting a low in January (almost
$0.68) soared beyond anyone’s expecta-
tions to a 10-month high of $0.80 (not
seen since June 2015). A new wave of
fund money at work in commodities
since the end of January is finding value
in all commodities, including crude
oil, copper, gold and silver. This has
lifted all commodity boats, provides
the underlying support for a rising
Canadian dollar and offsets a higher
hog futures price. The Canadian dollar
remains overbought, but fund managers
look like they want to continue buying
regardless of fundamentals. In fact, the
funds have added more money in the
first quarter than in any other quarter
over six years. Look for a steady to lower
Canadian dollar in the second quarter
of 2016 as $0.80 cents will act as major
resistance. BP
Maurizio “ Moe” Agostino is chief commodity
strategist with Risk Management.
Hog futures should hit their seasonal high
in summer
Chinese demand for pork imports has been strong, but the rise in the Canadian dollar is
offsetting a higher hog futures price
by MOE AGOSTINO
MARKETING