If 2025 was the year the market came to hog producers, 2026 told a much different story. Entering the year, producers had reason to expect favorable returns supported by a contracting breeding herd and more manageable feed costs. However, surging productivity on the farm and softening demand quickly rewrote the final chapter.
As producers close the books on 2026 and look toward 2027, six leading economists and ag lenders reflect on the costly lessons this market delivered and what it takes to protect an operation moving forward.
Lesson 1: Opportunity cost can turn a $21 profit into a $1 profit.
“Unfortunately, the duration of 2026 has provided an inadvertent lesson on opportunity cost,” says Lee Schulz, chief economist with EA Risk.
He defines opportunity cost as money or benefits lost by not selecting a particular option during the decision-making process.
“There are benefits to being patient, but there can also be real consequences to missing opportunities,” Schulz says. “In mid-January and mid-February, a farrow-to-finish profit of about $21 per head, on average, was forecast for 2026. That was derived using lean hog, corn and soybean meal futures prices to represent the market’s expectations. The point being that use of futures, options or insurance products at the time would have locked in favorable margins and the strongest profits for the year.”
Schulz notes that the early profit projection would have rivaled the annual average profit for 2025—a year when the market came to producers as the calendar progressed. 2026 was the exact opposite.
“Now an annual average profit of about $1 per head for all of 2026 is projected, with over $30-per-head losses possible to end the year,” Schulz adds.
Lesson 2: A smaller herd does not automatically mean a tight pork market.
“Producers continued to improve pigs per litter and market heavier hogs in 2026, allowing pork production to remain relatively ample even as the breeding herd contracted,” says Brian Earnest, lead animal protein economist at CoBank’s Knowledge Exchange.
At the same time, softer domestic and export demand limited the price response, Earnest explains.
“For hog farmers, the lesson is that productivity can protect an individual operation’s cost position, but industry-wide productivity gains also add pounds that must find a home,” he says.
Lesson 3: Supply gets the headlines, but demand dictates the price.
It’s easy for producers and analysts to give too much weight to the supply situation, says Altin Kalo, chief economist at Steiner Consulting. Producers possess an intimate understanding of the factors that impact supply such as disease, weather and feed costs. In addition, supply data is reported frequently and visibly.
However, Kalo argues that far more attention must be paid to demand.
“This is challenging due to gaps in both data and frequency of reporting,” Kalo says. “But some of the demand signals from this summer were there and the market was paying attention. Unfortunately for producers, all three pillars that support pork demand were negatively impacted: exports due to lower prices and oversupply from competitors, foodservice due to reduction in foot traffic and lower sales at quick service restaurants, and retail due to consumers cutting back on spending.”
Lesson 4: Consumer demand must be earned, not assumed.
Adding to the demand equation, Kansas State University agricultural economist Glynn Tonsor reminds the industry that domestic consumption cannot be taken for granted.
“While pork’s opportunity for improved consumer demand remains, to date that has largely not been realized domestically and has weighed on the marketplace,” Tonsor says. “The industry is leaning in on the importance of consumer demand accordingly.”
Lesson 5: Forward margins can vanish overnight.
Producers need to be proactive when margins are available, emphasizes Matt Erickson, senior research analyst at Terrain.
“This year demonstrated how relatively tight hog supplies and manageable feed costs can create favorable returns – that’s often expected – but it also highlighted how quickly those opportunities can erode,” Erickson says. “Domestic demand proved softer than expected, feed costs moved higher and forward margins compressed significantly over a short period of time. As production efficiency continues to improve across the industry, the demand side of the equation becomes increasingly important. Domestic consumption and exports must keep pace with productivity gains to support prices and profitability.”
Erickson notes that producers also learned that managing financial risk is just as crucial as managing production risk. Higher interest rates reinforced the importance of evaluating returns not only against production costs, but also against the capital invested in the business.
“The most resilient operations are those that pair production efficiency with disciplined margin management, strong liquidity, sound capital allocation and effective risk-management strategies,” he says. “In today’s environment, success depends not only on producing hogs efficiently, but also on protecting profitability when opportunities arise.
Lesson 6: Balance-sheet strength and discipline beat chasing market highs.
Producers who entered 2026 with adequate working capital, manageable leverage, and a well-defined risk management plan were better positioned to withstand volatility and adapt to changing conditions, says Chris Ford, vice president of corporate swine lending at Farm Credit Services of America.
While profitability will always be paramount, Ford believes liquidity and preparedness often determine how much flexibility an operation has when margins come under pressure.
“One observation that stands out from the past year is that some operations remained committed to their risk management plan even when it meant missing portions of the market highs seen in early 2026,” Ford says. “At the time, that may have felt disappointing. However, many of those same operations are now entering late 2026 and 2027 with lean hogs contracted at prices well above current market levels, helping protect margins as market conditions have softened.”
The goal of risk management is not to hit the absolute top of the market, Ford says, but to ensure long-term viability: “It’s a good reminder that the purpose of risk management is not to capture every market high, but to create consistency, protect profitability and reduce downside risk.”
