Most of this weakness was evident in nearby periods, with deferred margins only down slightly from two weeks ago, and overall profitability through the first half of 2012 remains very strong above the 90th percentile of the past five years. Even the second half of 2012 is projecting margins above the 80th percentile of the past five years.

Hog prices have begun to slip as it appears cutout values are coming under pressure. Cutout prices late last week were down around 2 per cent from the week before, and are beginning to reflect back to cash hog prices which likewise have declined. As of Thursday, the Iowa/Southern Minnesota lean carcass price was quoted at $86.05/cwt., down $6.20/cwt. or 7.2 per cent from the week before.

Feed costs meanwhile have stabilized as crop producers are deciding to store rather than sell newly harvested bushels off the combine. Basis levels are firming as a result, although demand remains tepid so far this marketing season. The current marketing focus remains on the opportunity to protect historically strong margins throughout 2012.