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If you were thinking of having some pork chops or ham for dinner tonight you might want to keep an eye on the price. The chart we're looking at is CME futures for lean hogs. What's a future? Well, it entitles you to buy a commodity in the future at today's price.
Let's say, for example, you thought the price of oil was going to be higher one month from now than it is today. Well, you might buy a future on the right to buy oil in a month at today's price. So, let's say a month goes by and the price of oil has actually gone up. Well, you can buy it at a lower price than what the market is paying for it: the idea being, there's your profit. You can sell it right back in.
This chart is just showing what people think the price of pork is going to be. Now, as you can see, the trend has been going up recently. This chart goes back to October of 2018. The reason for that has to do with what's going on in China. The African swine fever has been wiping out pig supply in China meaning there's less supply of pigs, demand has remained the same, so the price has gone up.
Now, US producers of pork thought: this is going to be a good thing for us. Prices are higher for our pigs even though China has tariffs imposed on US pork. Just as a note, Brazil also sells a lot of pork. But actually, as you can see, the trend has begun to taper off a bit as of late.
And the reason for that is that Chinese consumers have said, rather than paying these high prices for pork why don't we just supplement it for things like chicken or beef? Which, incidentally, has pushed up the price of chicken and beef and has brought this pork future price down a bit. But if you were thinking about going hog wild for some bacon tonight, now might not be the best time.
