Things to Consider….
With the first half of 2021 now behind us and the market settled well into the 3rd quarter, a clearer picture of slaughter and total pork production are starting to emerge. The impact of 2020, when liquidation occurred, has now surfaced in the numbers as shown by the US Federally Inspected Slaughter graph.
Up until late June, 2021 slaughter (red line) recorded volumes above both 2018 and 2019. However since the long weekend in early July, 2021 slaughter has been lower than 2018 and 2019 for 5 consecutive weeks. It is worth mentioning that the declines are very minimal compared to those years, but non the less they are lower and are projeccted to continue lower for the remainder of the marketing year.
At first glance the lower slaughter, lighter weights and reduced pork production might indicate a bullish price trend into the late fall months however a quick look at December futures relative to the last 6 years show that the above mentioned bullish factors are already priced into the market.
Hog producers looking to protecct against potential market weakness due to unforseen issues that may arise later this year, should use the current pricing opporuntity to limit risk for the end of 2021 and early 2022. The market is expected to be volatile and from the trend that appears to be forming in the December lean hog contract shown below, hedging is recommended soon than later.