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Paragon Commentary

Futures File: Hogs, Gold & Corn

Jun 26, 2020

Hog Prices Wallow

Pig prices are grinding to new lows, with August lean hog futures dropping under 48 cents per pound on Friday.

Back in early May, when the COVID outlook was optimistic, August hogs gained over 30% to reach 67 cents per pound, a sign that markets were expecting stronger demand by the end of the summer.

Now, as the U.S. case count is climbing, markets fear that slaughterhouses could stay hard-hit by coronavirus outbreaks, sapping demand for hogs yet again.

On Thursday, concerns about an oversupplied hog market were confirmed, after the U.S. Department of Agriculture released its Quarterly Hogs & Pigs Report. The government data showed that hog herds were 5% larger this year, exceeding expectations. Worse yet, the hog population rose most sharply for heavy-weight pigs, a sign that there is an overabundance of slaughter-ready animals that can’t be sold.

If pork processing remains a bottleneck, there could be an excess of animals and a shortage of meat, which will keep pork prices high for anyone that can’t dress a hog themselves.

 

Gold at 8-Year High

Gold neared $1,800 an ounce this week for the first time since 2012 as markets grow jittery over record-breaking U.S. COVID-19 cases.

In times of economic turmoil, investors often flock to precious metals, bonds or cash as they await a clearer outlook. Right now, stocks are seeing only moderate selloffs, and the U.S. dollar and bonds are relatively flat, a sign that gold is outpacing other assets.

So far, gold has stopped short of the round number $1,800 level, trading Friday for $1783, leaving that psychological barrier as the next target for market bulls.

 

Market Swimming in Corn

America’s top crop fell to new lows this week, with futures prices for this fall’s harvest dropping under $3.25 per bushel.

This year’s crop is growing well, with 72% of U.S. corn rated good or excellent right now. Weather for the next two weeks looks favorable across much of the Corn Belt, with much of the Midwest slated to receive rains in the coming days.

A healthy crop will lead to a large harvest, adding to the already-heavy corn supply. As renewed COVID outbreaks threaten to slow economic activity, driving demand could falter, reducing corn-based ethanol demand as well.

The next big market mover will be the USDA’s report on Tuesday, which will estimate the total planted acres of corn as well as the amount of the “old crop” current still in storage across America.

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