After bottoming at a 14-year low in October, the hog market has begun smoking higher. Prices have rallied nearly 40%, with December lean hogs topping 57 cents per pound Friday.
Some of the rally has been sparked by investors taking advantage of rock-bottom prices, but supply and demand factors are boosting values as well.
Prices are warming up as the temperature sinks; cold weather makes it harder for animals to gain weight, limiting the supply of meat.
Meanwhile, meatpackers have been rushing to buy hogs ahead of the Christmas holiday, taking advantage of still-profitable margins. Demand has been so high that a record 2.54 million hogs were slaughtered last week.
Longer-term, if the packers get caught with high pork inventory and lower demand, this rally could falter, but for now, prices are heading toward hog heaven.
Natural Gas Boils Higher
As thermometers dropped across much of the US, the natural gas market heated up, nearing a two-year high.
Natural gas is the dominant heating fuel in the United States, with electric heat a close second, but much of the nation’s electricity is generate from natural gas as well. This means that cold temperatures can boost demand for natural gas substantially.
Prices topped out Friday at $3.77 per million British thermal units, more than double the low price of $1.61 hit this March, a sign that this winter’s heating bills could be much higher than last year for many.
Soybean futures sank this week after news out of Washington dashed hopes for a bullish soybean market.
On Thursday, President-elect Trump nominated Oklahoma’s Attorney General, Scott Pruitt, to head the Environmental Protection Agency. Under Pruitt, the EPA may be less likely to support biofuels like corn-based ethanol and soy-based biodiesel.
If the EPA reduces mandates to use these fuels, demand for corn and soy could drop noticeably. This has led to disappointment among some farm-industry groups who expected Trump to create a more farmer-friendly EPA.
Then on Friday, the U.S. Department of Agriculture jumped its monthly estimate of global soybean production based on larger crops in India and Canada, while leaving unchanged its estimate of this year’s record-breaking domestic soybean crop.
Altogether, this rough news knocked beans to a two-week low near $10.20 on Friday.