Margins strengthened significantly over the first half of January from a combination of sharply higher hog prices and lower feed costs with USDA releasing an extremely bearish report for corn. The monthly WASDE finalized 2025 production at 17.021 billion bushels, a new record high and 477 million bushels above the average pre-report estimate as well as well above the high end of the range of estimates. Contrary to expectations, both acreage and yield increased from the last forecast and along with rising inventories in the U.S., global corn ending stocks increased nearly 12 million tons from last month following a production increase in China. While the soybean report was not as bearish as
corn, a similar trend was noted with rising U.S. and world stocks that led to a decline in soybean meal prices along with corn. The hog market advanced to new highs as the pork demand outlook remains supportive with limited supply growth seen in the near term. USDA’s January WASDE report forecast 2026 pork production up 740 million pounds from the previous estimate at 28.229 billion following the latest December Hogs & Pigs report survey. While supply growth is expected to be tempered in Q1, Q2 production is projected up 2.4% from 2025 while Q3 production is projected up 4.3% with the assumption that disease pressures will ease this winter and producers will continue harvesting hogs
at heavier weights. 2026 exports were also forecast up 123 million pounds from 2025 at 7.085 billion, based in part on larger expected production. While the discovery of ASF in Spain presents an opportunity for U.S. exports, potential trade friction with Mexico as USMCA gets renegotiated remains a risk factor. Our clients have built a strong forward delta recently following historically strong margin opportunities with flexible positions that will benefit from further margin strength over time.
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.
