Hog margins continued to march higher during the last half of June as lower feed costs more than offset a slight reprieve in lean hog futures. The quarterly Hogs and Pigs report on June 26th offered few surprises but weighed on deferred contracts. The total pig inventory was pegged at 75.137 million head, 0.53% higher than the average analysts’ estimate. This may be a direct result of larger litter sizes increasing to an average of 11.75 pigs per litter, 0.34% higher than the estimate. Compared to a year ago litter size was up 1.64%. Pork exports shipments ramped higher in recent weeks. Pork belly inventories saw a 26% decrease compared to last year. Feed costs continued to fall. New crop corn futures scored contract lows as the crop is off to a great start heading into the all-important month of July. The corn crop was rated 73% good/excellent through the week ending June 29. This was 3 points higher than the previous week and 9% higher than the 5-year average. Soybean meal futures fell to contract lows in the last half of June as regulations regarding soybean oil production and biofuel mandates are expected to lead to an increase in meal availability. Our clients continue monitoring targets to add new margin coverage in deferred marketing periods with flexible price strategies to benefit from 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.
