Hogs Experience Decline on a Wednesday
Hog futures took a dive on Wednesday, with lean hog futures closing at $1.175 lower – a loss of 62 cents. The USDA's national average base hog negotiated price also dropped by 2 cents to $93.00. But despite the bearish trend, the CME Lean Hog Index saw a 60 cents increase to $88.78 on April 28.
The good news came in the morning, with the pork cutout value edging up by 2 cents to $96.61. Rib and belly primals were the only parts to make gains, while the rest saw a drop. The U.S. Department of Agriculture (USDA) estimated the federally inspected hog slaughter on Tuesday at 487,000 head, boosting the weekly total to 1.461 million head – a jump of 148,000 heads from the previous week.
As for the hog futures, May hogs closed at $91.925, down $0.625, while June hogs closed at $98.275, a plunge of $1.175. July hogs followed suit, closing at $98.600 – a drop of $1.000.
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What's driving the Lean Hog Futures market?
Recent market fluctuations indicate several trends and factors that hold sway over the lean hog futures market:
- Price whiplash: The past week has shown significant volatility in June lean hog futures – falling from $98.275 per pound to $95.125 earlier in April, only to rebound and drop again.
- Market sentiment: The broader livestock market dynamics have led to bursts of strength, such as the surge in June futures by $1.80 to $95.125 earlier in April.
- Supply & demand: Second-quarter pork production is projected to be marginally higher than last year, which could impact prices. However, third-quarter production is anticipated to rise more substantially, potentially putting pressure on future contract prices.
- Production forecasts: The December–February pig crop will shape third-quarter production levels, which are expected to spike due to a higher slaughter rate and heavier dressed weights.
- Price outlook: Lean hog prices for the second quarter are anticipated to average around $63 per hundredweight, slightly lower than last year. In contrast, third-quarter prices are expected to surpass the previous year's levels.
- Market instability: The CME Group's Volatility Index (CVOL) serves as a gauge for risk expectations in lean hog futures, providing insights into market stability and potential price shifts.
- Linked sectors: Strength in other livestock sectors, like cattle, can have an impact on lean hog prices, as demonstrated by recent trading sessions where cattle strength propped up hog futures.
- On Tuesday, the U.S. Department of Agriculture (USDA) estimated the federally inspected hog slaughter at 487,000 head, a significant increase from the previous week.
- Despite the bearish trend in hog futures, the CME Lean Hog Index saw a 60 cents increase on April 28, indicating a potential recovery in real-estate related to the pork industry.
- Investors should take note of the volatility in June lean hog futures, as seen in the past week, with prices dropping from $98.275 per pound to $95.125 earlier in April.
- As the market sentiment shifts, investors may want to consider diversifying their securities portfolio to include commodities like lean hog futures, given the $4.83 trillion worth of opportunities in the commodity market.
