Pig farmers aren’t exactly living high on the hog these days. Lean hog prices have risen by just 4% in real terms over the past six years, says Mike Burnick on Burnickblog.sovereignsociety.com, falling miles behind other agricultural commodities such as corn, which has gained around 50% this year alone and spiked to a new record.
Because corn has risen much faster than hogs, the cost of fattening a hog has eclipsed the price they fetch in the market. With pig farmers losing money, they are thinning the size of their herds or calling it quits altogether.
But this is slowly reducing supply at a time of growing demand for meat worldwide. In nine months or so, “when the market has worked through the excess, hogs will be in short supply” and prices will jump, says Tom Dyson on Dailywealth.com.
The shortage is set to last for two years, since it takes that long to establish a commercial hog operation. We are currently in the lag between grain prices hitting record highs and hog prices doing the same after being pulled up in their wake. There is a London-listed ETF tracking hog futures (HOGS, $1.88).