Hog prices are rebounding from six-month lows, as investors anticipate demand for pork chops and bacon will pick up soon.
Retailers have snubbed pork since prices, spurred by a shortfall of hogs, surged to all-time highs in July.
The lack of demand helped prices pull back, and now some investors think they are at a level where grocery stores and restaurants are starting to increase their orders for pork.
“We’ve finally gotten pork products discounted severely enough to chase back demand,” said Dennis Smith, a commodities broker at Archer Financial Services in Chicago, noting stronger buying interest in hams and pork loins.
Lean hog October futures rose 5.7% last week, to 98.125 cents a pound on theChicago Mercantile Exchange. CME +0.14% Wholesale pork prices, which restaurants and grocery stores pay, rose $1.65 on Friday, to $101.10 per hundred pounds, based on Omaha, Neb., price quotes. That increase is helping to fuel expectations that retailers have started buying pork again.
Shoppers and diners may not see much change in price, however.
“Retailers haven’t lowered their prices, as consumers are still facing record-high beef and pork” costs, Mr. Smith said. The U.S. Department of Agriculture expects consumer pork prices to rise 6.5% to 7.5% this year.
Hog and pork prices rallied for months, notching new records nearly every week through July 15 on expectations a swine virus would dramatically reduce supplies.
While many animals did die from the porcine epidemic diarrhea virus, farmers were able to feed hogs to reach heavier weights amid the lowest costs for grain in years, muting the virus’s impact on pork supplies.
In its most recent monthly report, the USDA raised its forecast for pork production this year by 20 million pounds, to 22.78 billion pounds.
Hormel Foods Corp. HRL +0.16% , one of the biggest U.S. meat processors and the maker of Spam canned pork, said in August it had resumed normal production at one of its plants, after reducing shifts due to the tighter supplies this summer.
“The amount of hogs being processed has increased week over week,” said Jody Feragen, Hormel’s chief financial officer, on a postearnings conference call.
“A lot of these hog numbers that were down were being offset by higher weights, as well,” she said.
While the USDA’s new forecast still represents a 1.8% drop in production this year, investors seized on signs supplies would expand and pushed prices to the lowest levels since February. Futures prices fell about a third from the July peak of $1.339 a pound. Now, expectations for demand to return to the pork market are leading some to bet hog prices will climb.
“Maybe we’ve hit a bottom, and the futures market is saying, ‘Enough is enough,’ ” with the selling, said Steve Wagner, an analyst with CHS Hedging in Inver Grove Heights, Minn.
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