CIH Hog Margin Watch

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With the exception of the spot Q3 marketing period, hog margins deteriorated further in the second half of June, following a rally in feed costs that more than offset higher hog prices during the period. USDA released a few key reports at the end of the month, including the Quarterly Hogs and Pigs, the updated corn and soybean acreage, and June 1 Quarterly Grain Stocks. The updated hog inventory data was seen as relatively neutral, with most figures in line with pre-report expectations.

All Hogs and Pigs as of June 1 were pegged at 71.65 million head, up 3.42% from last year and a new record. The kept-for-breeding inventory at 6.069 million head was 1.51% above 2016, while the kept-formarketing figure of 65.581 million was 3.6% higher than last year. Overall, the report points to a continued supply increase through the fall and winter months, highlighting the need for ongoing strength in pork demand.

Meanwhile, corn acreage of 90.886 million was up 890,000 from the March planting intentions and above the range of market expectations. Also, June 1 corn stocks of 5,225 million bushels were likewise higher than expected, although the acreage and stocks figures for soybeans were below expectations and leaned bullish. Reaction from the soybean market coupled with ongoing drought concerns in the Northern Plains that has rallied spring wheat to over $8.00/bushel is now fueling a sympathy rally in corn with concerns that hot, dry weather may expand to the heart of the Corn Belt during July.

Our hog producer clients have benefited from recent adjustments to strengthen feed hedges following price weakness earlier this month, while likewise benefiting from previous adjustments to add flexibility to hog positions and take advantage of further potential upside in hog prices.

 

 

 

The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. The information contained in this publication is taken from sources believed to be reliable, but is not guaranteed by Commodity & Ingredient Hedging, LLC, nor any affiliates, as to accuracy or completeness, and is intended for purposes of information and education only. Nothing therein should be considered as a solicitation to trade commodities or a trade recommendation by Commodity & Ingredient Hedging, LLC. All references to market conditions are current as of the date of the presentation. Futures and options trading involves the risk of loss. Past performance is not indicative of future results. Please visit www.cihmarginwatch.com to subscribe to the CIH Margin Watch report.


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