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North Mountain Ag Services

Risk Management Comments March 27, 2017


March 27, 2017


Lean Hogs

Over the last six weeks, fourth quarter 17 lean hog futures have consistently run into resistance despite worries over belly inventory figures.  When you consider pork supplies looming over the industry with USDA projections of 2017 pork production at 25.6 billion pounds, it is understandable why investors are hesitant to express optimism.  Coverage through February 2018 looks attractive right now for producers that are managing their grain basis purchase targets in tandem with hog marketings.


Despite concerns over the past three weeks regarding export sales, March milk futures are trading around $16.  Strong butter and cheese sales are supporting the market and providing optimism that with current trends, milk prices may average $2 more per cwt over last year.  On the supply side of the equation, USDA continues to forecast 2017 milk supplies being 2.1% over last year, despite cow numbers being lower.


Current cold storage figures have created some concerns for cattle traders, but our view is a bit more optimistic.  Cattle on feed numbers are stable, and domestic consumption has been strong.  We believe it is important to keep in mind that fluctuations in cold storage numbers should be kept in perspective.  With less than 2% of beef supplies, and largely secondary cuts, cold storage numbers should not drive the market.


Corn basis in PA remains higher than the historical average in PA, and nearby futures have found support in light of growers’ planning for 2017.  Last year corn acreage was only 4 million higher than beans.  As growers focus on soybean costs fitting their budgets better than corn, there could be significant strength that finds its way into corn futures in the coming months.


As always, please call us for specific pricing targets that maximize your opportunities to protect and manage profit margin.

–         Brian Yingling

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