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Sow Slaughter and the Pork Markets

The chart of the week is US weekly sow slaughter. As reported in the latest issue of the Weekly Commodity Report, the percentage of sows slaughtered during April compared to total hog slaughter was the largest in 9 months which indicates that swine breeding herd liquidation likely accelerated during the month. Why did this occur? Well, inflated feed costs have pinched hog farmer margins for some time now with Iowa State estimating losses since the fall. Farmers, in an attempt to control further hog supplies and push hog prices higher, typically reduce the breeding herd which in turn will lead to a decline in available hogs down the road. Increased sow slaughter can actually be bearish for certain pork markets especially trimmings for the near term. However, the long term impact is bullish for pork. There has been talk in recent weeks that sow slaughter has slowed due to the increase in hog futures. And the recent rise in sow prices would support this. However, sow slaughter during May thus far has been roughly 7% bigger than last year and the largest for the time period this decade.*This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that a person will or is likely to achieve profits or losses similar to those examples. Neither the information, nor any opinion expressed constitutes a solicitation to buy or sell futures or options on futures contracts or OTC products. Covered parties (as defined below) shall not be liable for any direct, indirect, incidental, special or consequential damages of any kind, whatsoever (including attorney’s fees and lost profits or savings) in any way due to, resulting from, or arising in connection with this blog entry, including it’s content, regardless of any negligence of the covered party including but not limited to technical inaccuracies and typographical errors. “Covered Parties” is defined as American Restaurant Association Inc., ARA Trading and the employees of both companies. Commodity trading involves risks, and you should fully understand those risks before trading.
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