LEAN HOGS Lean hog futures closed flat to mostly lower on Thursday with the front month Feb near unchanged, Apr down 62 points with the summer hogs down over 100 points. While the early indications, based upon a weak dollar and rising commodity prices, is higher, I consider the pork fundamentals negative this morning. First and foremost is the fact that Russia has banned imports of all U.S. poultry. This is very negative for broiler prices and thus also negative for pork prices. Second, the hog & pig report was negative in that efficiencies in the pork industry are beginning to “override” breeding herd liquidation. Indeed, the fall pig crop was slightly larger than the pig crop one year ago, despite a 3% smaller breeding herd. The inelasticity of supply is negative for hog prices moving forward. In the short term, bitter cold temperatures is short term friendly as the severe winter conditions makes it difficult to move hogs. This situation, however, should be rather short term in nature. I’d look for a lower open followed by a lower close today.
