Cheap hams could steal the show from turkeys this Thanksgiving

Nevermind the traditional Thanksgiving turkey. How about a nice ham instead?

This year’s bird-flu outbreak in the U.S. means turkeys will be more expensive for families sitting down this month for their Thanksgiving meal. But domestic pork supplies and inventories are at records, with output set to reach an all-time high for the year.

It’s all adding up to cheap ham for the holidays. Wholesale prices are the lowest for this time of year since 2009, and Rabobank International predicts more Americans will turn to the meat instead of turkey when they celebrate the Thanksgiving holiday on Nov. 26. For Tom Misfeldt, owner of retailer Ranch Oak Farm Inc. in Fort Worth, Texas, the lower costs are allowing him to offer customers a spiral, honey-glazed ham 15 percent cheaper than a year earlier.

“Prices are lower than last year because there are a few more hog numbers, and more grain to feed hogs because of more rain,” Misfeldt said. He sells about 5,000 hams a year, with Thanksgiving the third-biggest day by volume after Christmas and Easter.

Hog prices tumbled 7.1 percent last week, to 55 cents a pound, on the Chicago Mercantile Exchange, and dropped to 53.925 cents on Nov. 6, the lowest since 2009.

Hedge funds aren't optimistic that prices will recover anytime soon. The funds and other money managers lowered their net-long position in futures and options by 28 percent, to 27,717 contracts, as of Nov. 3, according to Commodity Futures Trading Commission data published three days later. That was the biggest reduction since April.

The number of hogs slaughtered this year is above 2014’s pace by 7.9 percent, according to the U.S. Department of Agriculture. With meat packers still fetching profit margins that are more than triple the average since the end of 2013, the flood of supplies isn’t likely to end soon.

At the same time, a recent World Health Organization report that linked eating processed meats to cancer is sparking concerns about demand. Wholesale ham reached 59.65 cents a pound on Nov. 6, the lowest for the date since 2009. The price of pork bellies, used for making bacon, tumbled last week to the lowest since June, USDA data show.

A stronger dollar is helping to make domestic meat less costly, as overseas consumers turn to cheaper suppliers. That’s increasing the availability of American supplies. Through September, exports in 2015 dropped 4 percent from a year earlier, according to the U.S. Meat Export Federation. The Bloomberg Dollar Spot Index on Friday reached the highest since data begins in January 2005 and was little changed on Monday.

“We’re not seeing particularly strong signs of supply falling off, and then on the demand side, you have the headline impact with bad health news, and you’re also seeing some pretty average export demand,” said Fiona Boal, director of commodity research at Fulcrum Asset Management in London, which oversees $3.6 billion.

Hedge funds are just starting to realize that prices could keep dropping. While the speculators lowered their net-long position in hogs for two consecutive weeks, that follows four straight months of expanding wagers. Money managers had speculated that high beef costs would mean more consumers would turn to pork. Instead, overwhelming supplies drove hog futures lower.

There’s still the chance that higher pork costs in China could lift demand for U.S. meat as the Asian country ends some restrictions on shipments. Rising world consumption will help to lift prices in the long term, said Michael Underhill, chief investment officer at Pewaukee, Wisconsin-based Capital Innovations, which oversees $1 billion.

For now, the U.S. is awash in ham: inventories held in freezers increased 27 percent in September from a year earlier, to 247.4 million pounds, an all-time high, government data show. While wholesale prices for the meat tumbled almost 40 percent in the past year, frozen turkeys are up about 9 percent, government data show.

“We’ve had more ham than at any other time, so there should be Thanksgiving ham on the table, not turkey,” said Will Sawyer, an Atlanta-based vice president for Rabobank International. “It’s a heck of a lot cheaper than last year.”