CIH Hog Margin Watch: November

Margins were mixed over the first half of November, deteriorating slightly in nearby periods while a bit firmer further out on the curve. Both corn and hog prices were relatively flat over the past couple weeks while soybean meal continued to extend its rally in response to growing concerns of drought in key soybean production regions of Brazil. Increased hog slaughter and pork production has kept the market in check as supplies are adequate, and buyers appear reluctant to place supplies in cold storage due to demand concerns and increased carrying costs. Hog slaughter last week of 2.576 million head was down 100,000 from the previous week but 3% higher than a year ago. Estimated pork production last week of 546.1 million pounds was 1.6% higher than a year ago although carcass weights have been increasing which may revise this higher. Cutout values have held up well recently with support from the butt and picnic primals, while ham and belly primal
performance will be critical for the pork cutout through the remainder of Q4. September pork exports were estimated at 175,101 MT which were similar to last year and better than expected based on weekly data portending a 5% drop from 2022. USDA reported that pork exports to Mexico were up 14% from last year at 75,677 MT while exports to Canada were 13% higher than last year at 2,466 MT. Combined exports to these two markets accounted for 55% of total U.S. pork exports for the month while exports to key Asian markets declined by double digits from last year and now represent 26% of the monthly total versus 43% ten years ago and 60% twenty years ago. Our clients continue to add margin coverage in deferred marketing periods around the 70th percentile of historical profitability with flexible price strategies.

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.