Hogs Posting Mixed Trade Out of the Long Weekend

Lean hog futures are trading mixed, with nearby contracts showing slight gains while others decline. Pork inventories in cold storage reached their lowest level since 2004, down 8.71% year-over-year but up 11.32% from March, while the CME Lean Hog Index continues to climb, reaching $92.94 on May 22. Speculative investors increased their net long positions by 10,658 contracts, bringing the total to 91,744 as of May 20.

Analysis

Lean hog futures are exhibiting mixed trading patterns, with the nearby June contract advancing 37 cents while other nearby contracts experienced slight declines of around 10 cents. The CME Lean Hog Index continued its upward trend, increasing by 19 cents to $92.94 on May 22, signaling strengthening cash market conditions. This is further supported by April-end cold storage data, which showed pork inventories at 455.803 million lbs, the lowest for that month since 2004 and an 8.71% decrease year-over-year, although this figure also represented an 11.32% rise from March levels. Speculative interest remains robust, with traders in lean hog futures and options increasing their net long positions by 10,658 contracts to a total of 91,744 contracts as of May 20. The USDA’s FOB plant pork cutout value also showed strength, rising $2.91 to $104.37, largely driven by a $2.91 increase in the belly primal. Federally inspected hog slaughter for the previous week was estimated at 2.362 million head, down 38,000 head from the prior week but 9,081 head above the same week last year, while the 5-day rolling average for the USDA national average base hog negotiated price stood at $95.58.

Key Decisions for Investors

• Investors should note the supportive fundamental picture for lean hog prices, characterized by historically low year-over-year pork inventories, a rising CME Lean Hog Index, and increasing speculative net long positions, despite the mixed signals in near-term futures contracts.
• Monitor upcoming cold storage reports closely to assess whether the 11.32% month-over-month increase in inventories marks a significant shift or a typical seasonal build against the backdrop of a substantial year-over-year decline.
• The strong pork cutout values, particularly for belly primals, and sustained speculative buying suggest bullish undercurrents; however, keep a close watch on weekly slaughter figures and the 5-day rolling average base hog price for indications of supply response or shifts in cash market strength.