Margins improved over the first half of February as higher hog prices more than offset the impact from rising corn costs while soybean meal traded steady. Hogs continue to be supported from slaughter and pork production running below year-ago levels, despite USDA forecasting production in 2025 will end up 2.7% higher than last year based on the February WASDE report. Last week’s hog slaughter at 2.54 million head was down 0.4% from last year with the year-to-date total running 6.1% below last year. Pork production last week totaled 553.6 million pounds which was up 0.7% from last year although the year-to-date total is still down 5.6% from 2024. As a result, the pork cutout at
$101.99/cwt. is 9.3% higher the same week last year, with all primals above year-ago levels and in particular bellies and hams. While President Trump agreed to implement a 30-day moratorium on tariffs to both Mexico and Canada, 25% tariffs were separately announced on all steel and aluminum imports without exception while the Administration is also pursuing “reciprocal” tariffs against all trading partners. The U.S. and Mexico are highly dependent on pork trade with one another, with exports to Mexico accounting for 10% of total U.S. pork production last year and over a quarter of the overall growth in U.S. pork production over the past 25 years. Together, both Mexico and Canada account for 45% of total U.S. pork export volume. USDA’s latest WASDE report also reflected global corn stocks at 11-year lows, but approaching 29-year lows among major global exporters which raises the stakes for U.S. production this season. Our clients have significant forward margin coverage now in place and are actively monitoring opportunities to make strategic adjustments to existing hedge positions.
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.
