Things to Consider…. Cash hog prices have traded relatively flat since the middle of February when the CME lean hog index hit $100 US per cwt for the first time in 2022. Only in the last week have regional markets, like the WCB or ISM surpassed their highs of the year trading upwards of $110 US. With continued strength expected in regional markets, the index price is projected to move higher entering the second half of the second quarter. Tightening hog supplies south of the border which have been confirmed by many sources have the potential to raise lean hog cash prices further. However, without strength in cut-out, cash is going to be limited in its advances as packers are not willing to purchase abundant supplies at inverted margins. Historically, cash can trade above cut-out however as shown in the Cash vs Cut-out Price Spread graph, the occurrence of cash above cut-out does not last very long. Since 2015 there are less then 20 days where the spread was inverted/negative. Pork products are going to be the limiting factor heading into the summer months. The cut-out graph illustrates how pork primals were tracking like 2021 throughout April but dropped off sharply at the start of May which is counter-seasonal when entering the summer months. Recent news has referenced some easing of lockdowns in China as of late which could lead to pork purchases aiding the value of primals in the coming weeks and months. Also improving weather conditions in North America are leading to expectations of seasonal increases to consumption. With the recent collapse in lean hog futures producers are encouraged to take advantage of the annual top in cash markets until premiums are restored in the forward markets. |