Margins were weaker over the first half of February, resulting from lower hog prices and steady to slightly higher feed costs. Lean hog futures declined on weakness in the pork cutout, mostly due to the belly primal. After peaking just shy of $100/cwt., April hogs have declined into the low 90’s recently as belly prices at $140.92/cwt. are down 6.9% from last year. The pork cutout at $96.85/cwt. is very close to last year’s value of $97.71/cwt., although bellies continue to be a drag on the composite cutout. Ham prices at $84.78/cwt. compared to $88.31 last year are another primal that bears watching with an early Easter this year as that should help support the overall cutout seasonally. Food price inflation
during January posted a 4% year-over-year gain for food consumed away from home versus 2.3% for food at grocery outlets. The January pork price index was up 1.6% from last year with the bacon category up 0.6% year-over-year, ham up 1.6% and pork chops down 1%. Hot dogs and lunch meats however were up 4.3% and 5.4%, respectively, from last year. While the pork cutout has been weighing on lean hog futures, the cash hog market is expected to be supported in the near-term by producer-weights indicating current supplies despite recent winter weather disruptions. USDA’s February WASDE report lowered corn ending stocks by 100 million bushels to 2.127 billion based on a similar hike in annual projected exports to 3.3 billion bushels. The figure was below the range of pre report expectations and provided support to the corn market. Soybean ending stocks were left unchanged at 350 million bushels. Our clients remain well positioned with a strong
forward delta on both hog and feed hedges following historically strong margin opportunities throughout 2026 into early 2027.
The Hog Margin calculation assumes that 73 lbs of soybean meal and 5.3 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $44 per cwt for other feed and non-feed expenses.
Hog Margin Watch reports are provided by CIH. Click here to see CIH Hog Services.
