Hogs Mixed on Wednesday

Lean hog futures closed mixed on Wednesday, with front months slightly up while others declined, as the USDA National Base Hog price fell to $90.97 and futures dipped below cash prices. This market movement coincided with a significant 5.4% year-over-year drop in May pork exports and a decrease in the PM Pork Cutout Value, primarily due to butt losses. Weekly hog slaughter numbers also rose considerably, indicating increased supply and contributing to a potentially softer market outlook.

Analysis

Lean hogs closed on either side of unchanged on Wednesday, with front months up 5 to 52 cents and other contracts 10 to 22 cents lower. The USDA National Base Hog price was reported at $90.97 on Wednesday afternoon, down 68 cents from the previous day. Futures are now below the cash, but not the CME Lean Hog Index at $89.31, back up 14 cents on July 1. The CME will be closed on Thursday for the July 4th holiday, with a normal open on Friday. May pork exports total 584.7 million lbs according to converted Census data. That was a drop of 5.4% from last year and 10.9% below April. USDA reported the Wednesday PM Pork Cutout Value down 63 cents at $93.63. The butt was weighing things down with losses of $8.53, as just the picnic, loin were reported higher. USDA estimated Wednesday’s FI hog slaughter at 479,000 head, taking the weekly total to 1.427 million head. That is up 17,000 head from a week ago and well above the same week last year as the holiday fell earlier in the week. Jul 24 Hogs closed at $89.750, up $0.525, Aug 24 Hogs closed at $89.825, up $0.050 Oct 24 Hogs closed at $74.175, down $0.100, On the date of publication, Alan Brugler 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. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Lean hog futures closed mixed on Wednesday, with front months gaining up to 52 cents while deferred contracts declined by 10-22 cents. The USDA National Base Hog price fell $0.68 to $90.97, positioning futures below cash rates, though above the CME Lean Hog Index which rose 14 cents to $89.31. This dynamic suggests a softening in immediate market conditions relative to the futures curve. Supply-side pressures are evident, with the weekly estimated federally inspected hog slaughter reaching 1.427 million head, up 17,000 from the prior week and substantially higher year-over-year. Concurrently, the PM Pork Cutout Value decreased $0.63 to $93.63, primarily due to an $8.53 loss in butt values, indicating bearish sentiment in wholesale pork. Demand fundamentals also weakened, as May pork exports dropped 5.4% year-over-year and 10.9% month-over-month to 584.7 million lbs. The combination of increased domestic supply and reduced international demand signals a potential oversupply scenario, challenging price recovery.

Key Decisions for Investors

• Investors should closely monitor future export data and slaughter reports for sustained trends and their impact on market fundamentals.
• The widening spread between futures and cash prices warrants attention for potential basis risk or arbitrage opportunities.
• Given the increased supply and significant decline in May pork exports, a cautious or bearish stance on lean hog futures may be prudent, especially for longer-dated contracts.