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Heavy Hog Supplies Have Investors Anxious

October 19, 2016 at 23:58 by Brent Lantzy

In its latest WASDE report, the USDA forecast lean hog prices to decrease by 17% to $36–38 per cwt in the fourth quarter of 2016. The forecasted decline comes after prices averaged $53.71 per cwt during the second quarter of this year, and $49.26 during the most recent quarter. The USDA also raised its estimate for 2017 pork production from 25.5 billion pounds to 25.9 billion pounds.

US inventory of all hogs and pigs on September 1, 2016 stood at 70.9 million head, up 2% from this time last year, and up 4% from June 1, according to USDA data.

Another USDA report released on October 18 warns of the potential consequences of increased hog supplies:

[The Quarterly Hogs and Pigs] report foreshadows significantly higher hog numbers—with lower hog price implications, all else equal-as the industry moves into 2017.

In an interview with Pork Network, independent livestock futures trader Dan Norcini commented:

That’s an awful lot of pork tonnage coming onto the market. Pork demand is going to need to remain exceptional to absorb this wall of pork coming our way.

Front month lean hog futures on the CME gained 0.200 cents on Wednesday to settle at 41.325 cents per pound, with the February 2017 contract shedding 0.250 cents to close at 48.200 cents per pound.

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