Pig outlook: Lean hog futures bulls keeping power

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global pig news
calendar icon 29 July 2022
clock icon 3 minute read

The pig traders’ perspective: Lean hog futures prices continue their uptrends and bulls have the firm overall near-term technical advantage. August lean hog futures finished Tuesday around $2.50 below the rising cash hog index. That signals traders sense the cash index will peak soon, though it continues to rise and the widening discount should limit seller interest in lead-month futures. Traders also have more than a normal seasonal cash decline built into fall- and winter-month futures.

Lean hog futures fell a second consecutive session amid corrective, profit-taking pressure following last week’s rally to three-month highs. But futures remain supported by firm cash fundamentals continue to support prices. The CME lean hog index rose 91 cents to $119.13 (as of July 22), the highest level since June 2021. August futures currently are trading at a discount of $2.155 to the index. Tomorrow’s index is expected to rise another 35 cents, though futures’ weakness indicates traders are wary the cash benchmark may be nearing a top. Hog slaughter is likely to rise in the near term, with the increases accelerating by mid-August. Anticipation of the production surge, as well as diminished demand for the various grilling cuts and bacon, are reflected in the large discounts in fall and winter lean hog futures.

Latest US Department of Agriculture (USDA) reports, and other news

USDA cold storage report: pork stockpiles decline

USDA’s Cold Storage Report showed a June record 516.2 million lbs. of beef in storage. While that could imply sluggish demand, it may also be related to facilities building inventories due to ongoing strong exports. Pork stocks declined less than average during June to 541.0 million lbs., down 5.1 million lbs. from May.

China’s hog herd down nearly 2%

China’s hog inventory fell 1.9% from year-ago at the end of June, according to the country’s ag ministry. It noted the sow herd dropped 6.3% from year-ago. The ag ministry didn’t provide specific numbers on herd size.

Payments for US hog producers via SMHPP

USDA will issue around $62.8 million to eligible hog producers via the Spot Market Hog Pandemic Program (SMHPP) starting this week. SMHPP assists eligible producers who sold hogs through a spot market sale from April 16, 2020, through Sept. 1, 2020. While the program was originally funded at $50 million, USDA this week added $25 million to the effort. SMHPP payments are calculated by multiplying the number of head of eligible hogs, not to exceed 10,000 head, by the payment rate of $54 per head. The extra funds injected mean there will be no payment factor applied and eligible producers should receive 100% of their calculated SMHPP payment. There is no per person or legal entity payment limitation on SMHPP payments.

The next week’s likely high-low price trading ranges:

August lean hog futures--$113.25 to $123.65, and with a sideways-higher bias

September soybean meal futures--$425.00 to $454.00, and with a sideways-higher bias

December corn futures--$5.85 to $6.35 and a sideways bias

Latest analytical daily charts lean hog, soybean meal and corn futures

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