Hog margins fell throughout the first half of July as lower lean hog futures more than outweighed a decrease in feed costs. Hog futures fell under pressure on pullback in the pork cutout. Hams and bellies were particularly weak as participants fear a seasonal top forming. The Lean Hog Index has flatlined in the last several trading sessions as it awaits further direction. Hog slaughter is down 2.1 percent year-to- date, but heavier carcass weights have offset a share of the reduction. The latest Census Bureau trade data indicated May exports were down 3.14 percent from the previous month and down 3.4 percent from a year ago. Shipments to South Korea and Japan are particularly weak through the first 5 months of the year compared to a year ago. June retail bacon prices marked their highest level since October 2023 while the overall pork retail complex increased 0.9 percent from a year ago. As a percentage of beef prices, pork retail prices are at or near all-time lows, indicating a competitive position in the grocery meat case. From a feed perspective, corn prices fell as the market digests the prospect of a record large crop. All eyes are the prospective of a yield update in next month’s WASDE report. Soybean meal continues to fall to new contract lows as increased soybean oil used for biofuel in 2025/26 resulting from EPA’s significantly increased mandate and additional policy incentives is expected to keep supply plentiful in the near term. Our clients are patiently evaluating adjustments on the
recent pullback while keeping in mind the historically attractive margins on the table. They are leaning on flexible positions to maintain opportunity for margin improvement back toward 10-year highs.
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.
