Hog futures traded and closed mixed through Wednesday, with nearby prices under pressure while summer hog futures marked another day of good gains. The lean hog index was down $.23 at $55.91, and we estimate a $.39 decline for Thursday.
While the hog index has declined through February, the cash market is still close to $3 higher from the start of the year. The pork cutout, however, has moved the other direction and is down more than $6 year to date. The chart shows estimated slaughter margins started the year historically strong at more than $16/cwt but are now back in line with the 5-year average at $9/cwt or $19/head. A turn in product values is needed before a cash hog market recover can develop.
Summer hog futures are back to adding a premium on China concerns and hopes for large scale Chinese pork imports in 2019. Initial technical targets for June are just above the market, with major moving averages at $80-81. A trade deal with China is likely to result in stronger exports to China, which would put a floor under a supply-driven bearish hog market.