Hog futures are waiting for something to move them

The high incidence of PRRS and PED this winter will likely drag down the pigs per litter metric and impact the late summer and fall marketings.

The year-to-date hog slaughter is currently down 1.2% but when you compare the weekly average hog slaughter so far this year, the slaughter place is even (+.2%) from last year's pace. This is pretty much in line with projections made off the December Hogs and Pigs report. The March Hogs and Pigs report indicated the breeding herd, at just under 6 million, is the smallest breeding herd since 2014.

Currently, despite two years of profitable prices, there is no expansion occurring in the industry. Expansion in production continues to develop due to improved efficiencies in raising hogs. The pigs per litter began to flatten out last year but in the most recent Hogs and Pigs report, the metric took another jump, increasing by 2% to a record high 11.90 pigs per litter saved.

The USDA is currently projecting 2026 pork production to increase 2.5% versus 2025. They're forecasting third quarter production to rise more than 4% compared to the third quarter of last year. This is the number that I'm calling into question. One reason I'm suspicious of this projection is that my sources indicate that the incidence of porcine reproductive and respiratory syndrome and porcine epidemic diarrhea have shot upward this winter. This will likely drag down the pigs per litter metric and impact the late summer and fall marketings.

Another reason that I'm suspicious of the large jump in third quarter production is the fact that feeder pig prices are record high. Prices for early wean pigs are up 31% from one year ago and prices for 40-pound feeder pigs are up 13%. This tends to confirm the damage created by the spike in disease incidences cited above.

Finally, on the supply side there's ample evidence that hog weights are starting to decline with some sources suggesting that producers have been pulling pigs ahead this winter. Of course, the seasonal tendency is for hog weights to trend lower as the spring/summer temperatures rise. The demand side of the hog market is always highly debatable and more difficult to measure than supply metrics.

Currently the USDA is forecasting pork exports to be record high in 2026, up 3% from last year. Recent export data for February measured exports up 2%. Exports were higher to all countries with the exception of China and Australia. Pork exports to Mexico, our largest customer, are expected to remain strong. Mexican hog prices remain historically strong and well north of U.S. hog prices.

Recent cold storage figures seem to confirm that overall pork demand remains strong. Total pork cold storage is down 5% from last year. While ham stocks are even with last year, pork loin stocks are down 8% with bone-in loin stocks record low, down 26% from last year. Belly stocks are down 8%, rib stocks down 2% with pork butts also down 8%. With beef trimmings prices record high, it's no surprise that pork trimmings stocks are down 8%. The ratio of beef prices to pork prices is record high. Finally, recent evidence shows that the percentage of Americans entering the upper middle class and middle class is increasing which is positive toward red meat consumption, both beef and pork.

Regarding the lean hog futures market, I'm anticipating a seasonal high anywhere from the middle of June to the middle of July. I tend to believe the seasonal high this year will be toward the middle of July and possibly into the end of July. Keep in mind that ham prices are highly correlated with hog futures prices. As summer pork production declines and assuming that demand from Mexico remains strong in addition to overall export demand, my sources are projecting ham prices to approach $1.20 per pound. Current prices are in the mid 70's and near 52-week lows. So, if accurate, a surge in ham prices should be accompanied with an impressive rally in futures prices.

Specifically, I'm watching the June contract for a close above $108.00 to signal the start of a new up-trend and to signal that fundamentally, something bullish is happening. I'm anticipating a combination of reduced supply and improving demand to drive the hog index higher from the current $90.00 level. If/when the double top at $111.50-$112.00 is taken out, my upside target for summer hog futures will be $120.00. The spark to watch for would be a surprisingly low weekly hog slaughter accompanied with a sharp rise in cash hog prices.

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