Several factors are driving the positive outlook in the hog market, according to Bill Polovin and Dave Delaney of Ever.Ag.
“The summer months have been fueled by what I’m going to call managed money,” Polovin says. “We’ve had some good fundamental strength, but I would say the futures are in front of that fundamental market right now.”
He notes August trading up over $107, a cut out market possibly north of $114, and a cash market that gets $108 to $109 weighted average.
“We’re starting to see the managed money assert themselves in a very positive manner for our futures market,” Polovin adds. “That’s obviously adding good possibilities for our producers.
Supply and Demand
Delaney says the supply and cash market look good, but the demand side needs to get better still. He sees supply remaining steady with not a lot of expansion or people exiting the industry, which he attributes to better health.
“I think the productivity that we see in these sows, we have not hit the peak in potential,” he says. “If we get a clear runway and a healthy industry, we could make a lot of pigs.”
On the demand side, Polovin points out seasonally, retail cuts slide back.
“We start to rely on the ham and belly primals to help fuel that cut out market. And I still think that’s ahead,” he adds.
Managing Risk
Polovin and Delaney suggest producers take advantage of a positive market and look at a variety of marketing strategies.
“You look at where those 2026 contracts are sitting right now, and they provide a very good opportunity,” Polovin says. “It would be probably a good idea for producers to start looking at locking in some of those $20-ahead-plus margins depending on their cost of production. That’s certainly the message that we’re trying to push out to the producer.”
They offer these suggestions for producers to hedge price risk:
1. Comprehensive Hedging Approach:
- Use a “crush” strategy: buying grains and selling hogs
- Implement a multitool hedging approach
2. Specific Hedging Tools:
- Futures contracts
- Options contracts
- Livestock Risk Protection (LRP) insurance products
- Over-the-Counter (OTC) products for potentially higher future sales
- Utilizing contract strips for broader protection
3. Timing and Contract Considerations:
- Look at 12-month forward contracts
- Lock in profits when margins are favorable
4. Risk Management Principles:
- Don’t get locked into a single strategy
- Consult multiple sources and understand available products
- Assess individual cost of production
- Remain flexible and adaptable to market changes
To hear more of the conversation with Polovin and Delaney, listen to “AgriTalk.”
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