Pork Profit Maximizer – Retail Edition

June 24, 2019

Earlier in the spring futures markets struck a very bullish tone for the US meat complex, largely based on expectations that a meat supply hole in China would present significant competition for domestic end users. The role of futures markets is to look for supply/demand imbalances and adjust the pricing mechanism in order to correct for them. Higher prices did what they were supposed to do, they rationed out forward demand in a number of ways: a) causing processors and users to raise prices they charge to their customers; b) encouraging producers to maximize production efficiency; c) encouraging everyone to build more inventory. But all this was based on the explicit assumption that summer demand was going to be explosive.