CIH’s Hog Margin Watch Report for March 1-15, 2024

Margins were mixed over the first half of March, improving in nearby marketing periods and steady in deferred slots. Hog futures continued to push higher to start the month as demand indications have remained strong which has kept pork cutout above $90/cwt. While strength in the belly primal has been responsible for a good chunk of the overall strength in pork cutout, fresh pork cuts have held up quite well given that hog slaughter and pork production are higher year-to-date thus far in 2024 relative to last year. Both the pork loin and butt primals are up about 10% year-over-year while spare ribs are up 47% from 2023. Increased pork production and the impact of California’s Prop 12 restrictions taking affect were expected to exert a negative impact on prices but that has not happened so far in Q1 as pork remains competitive relative to chicken and beef. Also, consumers are dining more at home where inflation has not increased as much as dining away from home which has likewise supported domestic demand. Export demand has also remained strong. USDA’s ERS reported January pork exports up 5.8% from last year at 587.8 million pounds. Shipments to Mexico increased by 3.2% from 2023 and at 235.8 million pounds
were the second highest monthly total on record behind December 2023. Tyson Foods recently announced that they will close their Perry, Iowa pork plant this June which currently has a daily processing capacity of 8,250 head. The quarterly hogs and pigs report at the end of the month will shed more light on how much of a factor this lost capacity may be for the market in Q4. Our clients continue adding new coverage in deferred periods given strong historical margins with flexible strategies to allow for further 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.