Hogs Showing Strength to Round Out the Week

Lean hog futures posted modest gains of 35-65 cents on Friday, despite a $1.03 decline in the USDA national base hog price to $98.74 and a 56-cent drop in the CME Lean Hog Index to $103.70. Concurrently, the FOB plant pork cutout value increased by $2.05 to $109.40, suggesting some wholesale demand resilience amidst lower live hog prices. Federal hog slaughter for the week totaled 1.939 million head, slightly above the previous week but below last year's comparable figures, indicating stable but not expanding supply.

Analysis

Lean hog futures are showing some buying on Friday, with midday gains of 35 to 65 cents. USDA’s national base hog price in the Friday morning report saw action down $1.03 from the day prior to $98.74. The CME Lean Hog Index was down another 56 cents on October 1 at $103.70. USDA’s FOB plant pork cutout report from the Friday AM report was $2.05 higher at $109.40 per cwt. The butt and rib primals were the only reported lower. USDA estimated federally inspected hog slaughter at 490,000 head for Thursday, with the week to date total at 1.939 million. That is 5,000 head above last week but 3,558 head below the same week last year. Oct 25 Hogs are at $99.025, up $0.350, Dec 25 Hogs are at $87.325, up $0.650 Feb 26 Hogs is at $89.075, up $0.625, On the date of publication, Austin Schroeder did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. More news from Barchart - The Pigs Are Going Out to Pasture, So Sell Lean Hog Futures Here - Bye Bye BLTs: How Much Lower Can Hogs Go as Peak Grilling Season Ends? - Lean Hog Futures Are Heating Back Up. Can They Rally Here? - Lean Hogs Are Starting to Stumble. Are Prices Set to Fall? The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. The lean hog market is presenting divergent signals, creating a complex trading environment. While futures contracts are showing modest buying interest with midday gains of 35 to 65 cents, the underlying physical market is exhibiting weakness. Specifically, the USDA national base hog price fell by $1.03 to $98.74, and the CME Lean Hog Index, a reflection of recent cash prices, also declined by 56 cents to $103.70. In a strong counter-signal, however, wholesale demand appears robust, as the USDA FOB plant pork cutout value rose significantly by $2.05 to $109.40, suggesting healthy processor margins and strong end-user demand. The supply-side data is relatively neutral, with the week-to-date hog slaughter of 1.939 million head being slightly above the previous week but marginally below the same period last year, indicating that supply is stable and not a primary driver of current price action. This dissonance between a softening cash market and a firming wholesale market is the key dynamic for investors to interpret.

Key Decisions for Investors

• Given the conflicting signals between falling cash hog prices and rising wholesale cutout values, investors should consider a neutral to cautiously bullish stance, as the strength in the cutout market may eventually pull cash and futures prices higher.
• Monitor the spread between the futures market and the CME Lean Hog Index; a widening of this spread could signal short-term speculation, while a narrowing could indicate the futures market is beginning to better reflect underlying fundamentals.
• Pay close attention to upcoming USDA slaughter and cutout reports, as continued strength in pork cutout values combined with stable supply would be a strong indicator that the current weakness in the base hog price is temporary.