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Weekly Purcell Report

by 5m Editor
29 October 2003, at 12:00am

US - Agricultural US Commodity Market Report by Wayne D. Purcell, Agricultural and Applied Economics, Virginia Tech.



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When the rampaging cattle market quit and turned volatile and started giving us something that looks like topping action on the chart, the lean hog futures really took a price hit.

The December is trading down toward the $51 level. That's in sharp contrast with the price slightly above $61 on October 15. Short hedges should have been placed on the last rally up toward the old highs and I certainly hope those short hedges are in place.

I would not do anything additional here until we see this market find some support and if it doesn't find it before then, the low at $49.65 which occurred back on August 18 is going to stop the lower prices in the December.

We have very high weekly and daily slaughter levels and the market is just not able to move this increased tonnage through the pipelines without lower prices. The national hog market on a lean carcass basis has a weighted average price of below $46 and that puts live base prices down in the low $30's, back at a near or break even position for a lot of producers.

It's going to be important to get some benefits out of these short hedges. I would advocate looking to buy back these short hedge positions in December and the first quarter 2004 contracts if the December moves down toward that recent and important low at $49.65.

If you're a bit more conservative, you might wanted to wait and see if buying support does emerge before you step up and buy back the short positions.


5m Editor