Hog Futures Relax Ahead of Inventory Report: CME hog futures were slightly lower on Wednesday on reduced fund demand ahead of Thursday’s Hogs and Pigs report. October rose $.35 to narrow the spread to the cash index, while the rest of the market was just below unchanged.
The CME cash hog index was down $.08 at $84.21, and AgResource estimates a $.16 decline for Thursday. The graphic plots the two-price series that are used to compile the cash hog index. Negotiated hog volume has made up just 3% of the total volume in the index in 2024, but price convergence or divergence is reflective of supplies and packer demand. Through the summer, negotiated prices were like formula prices, but prices have diverged in the last 2 months on large carcass weights and building supplies. The average negotiated price this week has been $6/cwt under the average formula price and the lowest since last March. Price spreads will further widen as hog supplies increase in the coming months.
CME hog futures have rallied into the inventory report and our concern is that December hogs could hold as much as $10 of downside price risk in the coming months.
