August 25, 2010
US pork price hit record high on strong exports
The average US pork price hit a record high for a second straight day on Monday (Aug 23) amid strong exports and tight supplies, according to government data and traders.
The average pork price reached a record of US$97.79 per cwt on Monday, beating Friday's record high of US$95.49, said the USDA.
The data helped to bolster confidence among traders that domestic demand for pork was improving. There had been concerns that rising prices could curb domestic demand. However, economist Ron Plain believes that domestic demand is set to improve as production is down and exports are up.
Gains were recorded in most average pork products as reduced production and good demand boost pork prices.
Meanwhile, the average price was up US$2.30 on Monday and has risen US$3.43 per cwt in the past two days and has gained US$7.14 per cwt in since the start of August.
The recent run-up in cash pork prices exceeded the previous record highs posted in August 2008 when China was buying pork to meet demand for the Olympic Games it hosted.
The rally this time was fueled by very tight bacon supplies, which lifted cash pork belly prices to a record high of US$150 per cwt recently, traders said. But the market could be nearing a top, traders said.
Cash and futures markets broke sharply back in 2008 once China completed its purchases and that kind of price break could come again if the high prices shut off demand, said Dan Norcini, an independent hog trader.
"Once that high was posted (in 2008), the cutout (price) dropped 20% over the next three-week period. Cash hog prices fell 21% over the same period, with futures dropping nearly 11% over that same time period," Dan said.
In the meantime, demand for certain pork products still remained strong and that may offset the seasonal increase in hog marketings and stepped up pork production.
"It's still BLT (bacon, lettuce and tomato sandwich) season. It's still grilling weather and I'm not looking for demand to soften any time real soon, but the supply should be increasing," Plain added.
