Tuesday was an inside day of trading for August hogs, which was caught between July pushing higher on strong cash values ahead of expiration, and the rest of the market that is pricing in a seasonal top. July hogs expire next Monday, and settled on par with the cash index. The hog index was unchanged at $92.46 and projected $.13 higher for Wednesday.
The latest estimates for hog producer profitability as calculated by IA State University, show wean to finish hog feeding margins reached a 33 month high during the month of June, of nearly $24/head. Feeders benefited from weakening feed grain and protein meal prices, while strong demand for pork bellies lifted hog prices to multi year highs. While market hog prices gained, spot weaned pig prices slipped to an 8 month low, taking estimated margins for wean to finish operations into the red for the 1st month since October. Higher feed costs will work against margins in both types of operations in July, and is likely to reduce demand for weaned pigs that will be marketed against December.
December hogs fell back to the old highs at $64 on Tuesday, and our view remains bearish on rallies.
