CIH’s Hog Margin Watch Report for December 1-15, 2022

Margins improved slightly over the first half of December as hog prices firmed while trends in the feed market were mixed. Corn prices slipped while soybean meal posted a sharp rally on oil/meal spread unwinding. Disappointment with the EPA’s RFS proposal for biodiesel blending over the next three years caused a sharp selloff in the soybean oil market which in turn supported soybean meal prices. The hog market has been supported by strength in cash hogs as basis is much stronger than the seasonal average for this point in the year. FAS trade data for the month of October revealed strong export demand. Exports of fresh, frozen, and cooked pork totaled 100,347 MT which was down about 1% from last year on a volume basis, but total export value of $571.1 million was 10% higher than last year. Pork value exports of $180 million to Mexico were up 44% from last year, and Mexico also represented the strongest market by export volume at 72,974 MT which was just 1% less
than last year and accounted for about 40% of total pork export shipments during October. Exports to China of 19,192 MT were up 21% from a
year ago and represented the largest export volume gain. High prices for certain pork items, especially hams and trim negatively impacted more price-sensitive buyers, particularly those whose currencies have been hurt by U.S. dollar strength. The Consumer Price Index (CPI) for November showed a gain of 7.1% over last year which was down from October’s 7.7% increase, with the retail pork price of $4.95/lb. down 2.0% from October but 2.5% above last year. The November retail pork price marked the first month-over-month decline for that price series this year. Our clients continue to target levels for adding new margin protection in deferred marketing periods with flexible price strategies.

The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses.