CIH Hog Margin Watch: May Special Report

Margins were mixed over the second half of May, deteriorating in nearby marketing periods but strengthening slightly in deferred slots. Prices for both hogs and feed costs declined over the past couple weeks, although pressure in nearby hog futures more than offset the
drop in corn and soybean meal. Weakness in the pork cutout from declining ham and belly primals is putting pressure on the hog market. The ham primal has declined $8.50/cwt. or 9.5% since mid-April contributing $2.10 to the drop in the pork cutout while the belly primal has declined 12% from $147/cwt. to $130 over this span contributing an additional almost $3.00/cwt. to the drop in the pork cutout. Weaker export demand from Mexico has pressured the ham primal while slower domestic foodservice demand and high frozen belly inventories are weighing on bellies. USDA reported total pork in Cold Storage at the end of April of 502 million pounds, down 11.7% from last year but up 8.2% on the month which is much higher than the average seasonal increase of 3% for April. In addition, pork belly inventories of nearly 77 million pounds were 5.5% lower than a year ago but 21% higher than the five-year average. On a positive note, Iowa State University estimated average farrow-to-finish hog returns during April were $11.92 per head which was a significant improvement to last year’s record monthly loss during April of $49.47 per head. Lower feed costs for both corn and soybean meal have reduced projected breakevens for the
average farrow-to-finish operation to $86.78/cwt. from last year’s $102.12/cwt. Our clients continue making strategic adjustments on existing hog positions to add upside price flexibility for potential margin improvement 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.

Hog Margin Watch reports are provided by CIH. Click here to see CIH Hog Services.