Pork spending down

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Aug 1, 2014

Hogs Grind Lower

A hog virus ravaged the pork industry over the last year, killing off piglets and driving prices to record highs, but the virus is largely under control and farmers have begun vamping up pork production again. Even though the national herd is far smaller than previous years, the animals are much larger, averaging nearly 20 pounds heavier than usual for this time of year. Hog producers have been able to offset animal losses by fattening up the remaining hogs on cheap corn, which fell to a new four-year low again this week, dropping to $3.64 per bushel. As a result, large pork supplies are weighing on the market now, sinking prices.

Meatpackers planning for the end of the grilling season are beginning to pull back on their pork purchases as well, hoping for even lower prices, which is hurting demand. As of midday Friday, August lean hogs traded for $1.18 per pound, the lowest price since April.

Petroleum Plunges

Crude oil prices continued sliding this week, dropping to the lowest price in nearly six months. Although there has been little fresh bearish news that should knock prices lower, this week's drop in crude oil and gasoline prices will be a welcome relief to American drivers. 

Since peaking out in late June during the height of the Iraqi insurgency, crude has shed over $9 per barrel, while gasoline prices have fallen nearly 30 cents per gallon. Midday Friday, crude oil futures were worth $97.25 per barrel, while gasoline futures traded for $2.75 per gallon, a price that represents the wholesale value of gasoline, without taxes, transportation or other expenses included.

Longer-term, analysts warn that there are numerous factors that could make the petroleum markets spike higher. Ongoing conflicts in Syria, Palestine and Iraq could escalate and disrupt the flow of crude from the Middle East. Looming sanctions against Russia due to their involvement in the Ukrainian crisis could restrict oil exports from the world's second-largest seller of black gold. Finally, there have been increasing signs that the U.S. will begin exporting a significant portion of its domestic crude oil production, with some industry experts predicting that as much as 10 percent of U.S. crude could soon flow out of our country, potentially raising domestic prices.

Otherwise, without an outside shock, ballooning North American crude oil production could continue increasing supplies, keeping a lid on prices.

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Alex Breitinger

 

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