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Is a bear in the hog market?

Ag Marketing IQ: U.S. grain exports to Brazil coupled with strong consumer demand and crisis in other meat markets may lift profit for pork producers.

John Payne, Ag risk management advisor

April 30, 2024

3 Min Read
Bear shadow on spreadsheet
Getty Images/Hemera Technologies

With the world chasing meat substitutes, hog producers and processors alike may wish they owned the meat and not the animal. At least that’s the consensus at “Pork School,” a weekly roundtable we host at Advance Trading.

Wall Street venture capital firms and large meat conglomerates seem to agree, as they are throwing money into any venture to synthetically create “meat” or derive it from sources like crickets or mealworms. And who would blame them? Growing an animal is hard these days.

Between government initiatives designed to make producing livestock as difficult as ever, spiking feed prices, constant bio-security concerns and increasing costs of operating capital and labor, who would blame them? The investing world seems to think a shortcut is going to get the U.S. to a place where protein prices fall to more comfortable levels for consumers.

Going back to the pre-COVID world, producer margins for cattle and hogs were negative or close to it. Ethanol was probably partially responsible as livestock production in the main areas of the U.S. corn belt collapsed, and corn farmers turned into energy producers. This slowly shifted the supply of diversified livestock and grain producers to those who could afford to just grow row crops. Marginal livestock producers began to exit. While we saw consolidation happen at the end of the production chain, those at the beginning were not being incentivized to grow.

Fast forward to post-COVID where U.S. wages are spiking, and inflation continues to rage across the labor sector. In the years between 2015 and 2020, the 20-week moving average for the pork cutout ranged from $70 to $82 depending on the time of the year. Since 2021, the range has been between $87 and $118.

CME feeding margins or “hog crush,” as we call it at Pork School, show a similar story. Profit margins are there for producers to grab should they want them. The challenge is getting more producers to chase them, instead of fewer producers growing more.

Interest rates, labor and building costs are preventing new farmers from getting involved. This would argue future feeding margins need to go up for production to rise instead of contract. The June 1 and Sept. 1 quarterly reports will be telling as to producer behavior. If the sow herd would grow instead of contracting, then maybe the free hand of the market could resolve the situation.

We see plenty of reasons to be bearish and manage risk at these levels. Too much investment is on the table to think otherwise.

The producers involved have an edge here and could be looking at even better margins in the years ahead if Brazil continues to grow and eat into U.S. corn and soybean export market share. This, combined with a continued strong consumer, high beef prices, and avian flu-riddled poultry herds could bring prices even higher for pork producers.

Producers must have a plan in place to be able to participate. Seek a trusted advisor who will work diligently on your behalf.

Contact Advance Trading at (800) 747-9021 or go to

Information provided may include opinions of the author and is subject to the following disclosures:

The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

About the Author(s)

John Payne

Ag risk management advisor, Advance Trading, Inc.

John has more than 17 years of experience in different levels of the ag industry. He graduated with a degree in economics from the University of Iowa. Afterward, John joined the U.S. Navy, serving two tours in Operation Iraqi Freedom. He began his career trading hogs on the floor of the CME before moving to the screen as an ag advisor helping producers manage risk with futures and options. Before ATI, he worked with a firm that traded over-the-counter derivatives with farms in South America. John’s experience and expertise now focus on U.S. producers with ATI and The Pork School.

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