Things to Consider…. Historically speaking, pork cut-out values, as illustrated in the following graphs, are at their highest levels seen in history for this time of year. Only in 2020 has pork cut-out surpassed the $100 US per cwt mark in the 4th quarter until this year. Pork cut-out has now spent most of 2021 above the $100 mark surpassing that price level back in March. Expectations are for cut-out to drift lower into the end of the year, which is very seasonal, however a value sub $80, which is common at calendar year end, is not necessarily in the cards. With the newly traded pork cut-out futures slowly gaining traction and volume, their values are becoming more usable to industry participants. The December 2021 Pork Cut-out futures contract shown below has reached highs above $100 US per cwt and found significant support around $90 US. Expectations are for the meat market to hold pork in and around $95 US per cwt as it trades currently. Volatility is expected to continue as uncertainty around exports continues to loom. With cut-out pegged near $95 for the end of the year, the historical spread below (green line) shows a spread to CME cash between $0 and $20 per cwt. More recently the spread has been large around $20 US per cwt but on average remains around $10-15. With cut-out at $95 that would result in a CME cash between $80-85 US per cwt for December lean hogs. For reference Dec 2021 lean hogs are trading at $78.70 US per cwt implying a discount to cut-out more than what has been seen so far this year.
|