Margins strengthened over the first half of January as hog prices rose, particularly in deferred contracts, while the feed markets were mixed with corn continuing to move higher while soybean meal prices set back. Both cash hogs and pork cutout have been relatively steady since the end of the year after a drop in ham values post-holiday caused some weakness in the cutout to end 2024. From mid-December through the first week of January, the pork cutout declined $9.50/cwt. or about 10%, as a $5.40/cwt. drop in ham values was the biggest weight on the index. From December 23 to January 6, the volume of #23-27 bone-in hams sold on a spot basis totaled nearly 23 million pounds, 88% higher
than the same period a year ago as discounts were needed to clear inventory following buyers who needed to scramble to secure supplies earlier in December to fill holiday orders. Weakness was also noted in the loin primal which declined 4.2% during the same period. Strap-off boneless pork loins are trading at half the price of 81CL coarse ground beef, the lowest relative value for this time of year in the past 15 years.
The wholesale price of strap-off boneless pork loins is also only marginally higher than the price of boneless, skinless chicken breasts, compared to a multiple of 1.55 times during the same week a year ago. Following the January WASDE, USDA raised their projection for 2025 pork production which is now estimated at 28.525 billion pounds, up 2.6% from 2024. In addition, pork exports which rose 4.2% last year from 2023 are forecast to increase another 3.1% in 2025, which will absorb some of the 722-million-pound rise in production. Following a bullish WASDE report for corn and soybeans, our clients have been adjusting feed hedges to add downside flexibility after a strong move higher in
both markets.
The Hog Margin calculation assumes that 73 lbs of soybean meal and 5.3 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $44 per cwt for other feed and non-feed expenses.
Hog Margin Watch reports are provided by CIH. Click here to see CIH Hog Services.
