As I type this article the value of the hog carcass and cash hog prices are at their highest levels of the entire year. The normal seasonal decline in hog numbers and the decline in average hog weights is happening. Exports appear to be solid, although somewhat erratic due to tariff headwinds. Summer hog futures are premium to the hog index, which again is normal. The index is moving higher.
Currently the latest CME lean hog index stands at $94.84 with June futures closing out last week at $101.32. The June hog contract goes off the two in two weeks, on Friday, June 13. My guess is that this contract will go off the board between $101-$102.
There are two wildcards facing the hog market into summer. One involving supply and the other involving demand. I’ve been hearing from multiple sources since last fall that PRRS has been rampant in sow units throughout the hog belt. Extremely difficult to measure and quantify, odds are high that butcher hog numbers this summer and into fall will fall short of projections made from information contained in the USDA quarterly Hog and Pig reports.
Packer behavior seems to confirm this bullish outlook. Packers have been reducing kill hours and yet still chasing pigs through aggressive bidding. The most recent weekly hog slaughter, projected to come in at 2.200 million, fell well shy of this projection, estimated at only 2.163 million pigs.
Hog prices are currently profitable, trading above breakeven which has not been a common occurrence over the last 12 to 16 months. Funds continue to build a net long position in futures with open interest rising almost daily. Yet futures have been relatively quiet with rallies well sold. It appears that producer/hedgers are actively taking the other side of the fund buying, seemingly capping off rallies. The most recent information shows that hedge funds are net long around 94,000 contracts with the record large long position from last fall measured at just over 133,000 contracts.
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