Will Pigs Fly This Peak Season?
Lean hog futures prices rallied 19.60% in 2024, closing last year at the 81.30 cents per pound level on the nearby CME lean hog futures contract. In my early January quarterly Barchart article on the animal protein sector, I concluded:
The trend is always your best friend in markets, and it has been bullish in live and feeder cattle and lean hog futures since the April 2020 lows. As the animal protein markets move into 2025, prices remain on a bullish path. The peak grilling season begins in May and runs through September when the demand increases, and prices often reach seasonal highs. However, the potential for U.S. tariffs in 2025 could cause the most volatility in beef and pork prices.
Lean hogs were higher than the 2024 close on January 2, 2025, at 81.675 cents per pound. In late March, the price for May delivery was around 89.00 cents per pound, as the 2025 grilling season is on the horizon.
The USDA lowered its hog price forecast in the March WASDE report
The U.S. Department of Agriculture’s March World Agricultural Supply and Demand Estimates Report (WASDE) told the live hog futures market:
Pork production is lowered on a slower rate of slaughter in the first quarter, partially offset by heavier dressed weights.
Pork exports are reduced on lower expected domestic supplies and increased global price competition.
Hog price forecasts are lowered for the second and third quarters, based on recent prices and slightly weaker demand than previously expected.
The report was bearish for pork prices.
A bullish trend since early March
Meanwhile, lean hog futures for May delivery have increased since early March.
The daily May futures chart shows the 8.3% rise from the March 4 84.85 cents low to the most recent March 17 91.90 cents per pound high. At around the 89 cents level in late March, lean hog futures remain closer to the recent high.
With the peak grilling season on the horizon, the forward curve over the coming months reflects the expectations for higher lean hog futures prices.
The forward curve illustrates that lean hog prices peak in 2025 during the grilling season in July at around 97.50 cents per pound.
The monthly chart shows resistance at $1 per pound
The long-term monthly lean hog futures chart highlights that technical resistance is around the $1 per pound level.
The July 2023 high was at $1.0075 per pound, the first resistance level. In April 2024, the hogs reached a $1.0965 per pound high.
The monthly chart shows that annual price peaks tend to occur during the spring and summer months when pork demand reaches highs from the Memorial Day weekend in late May through the Labor Day weekend in early September. BBQs across the United States will be working overtime during the coming summer months, with ribs, sausages, and other pork products on the menu.
Tariffs and trade issues could impact prices- The future of Smithfield Foods
Tariffs under the Trump administration is impacting commodity prices as the raw materials are global assets.
The chart shows that China is, by far, the leading pork-producing country, followed by the E.U., U.S., Brazil, Russia, Canada, and Mexico. Tariffs could cause U.S. pork prices to rise over the coming weeks and months.
Meanwhile, a Chinese multinational conglomerate paid $4.7 billion for Smithfield Foods, a leading U.S. pork producer and food processing company based in Smithfield, Virginia. The tariffs and push for “Made-in-America” products by American companies could change Smithfield’s ownership dynamics over the coming months. After the Hong Kong-based Chinese company purchased Smithfield Foods, the company was a private enterprise. With punitive and reciprocal tariffs on the horizon, the Chinese WH Group spun off Smithfield Foods, which now trades on the NASDAQ under the symbol SFD. Time will tell if the Smithfield spinoff, tariffs, increased seasonal demand, or other factors cause pork prices to follow cattle higher over the coming months. Lean hogs reached a record high of $1.33425 per pound in 2014 and a lower high of $1.27325 in 2022, which stand as the long-term technical resistance levels.
There are no pork ETF or ETN products- Futures are the only arena for pork price participation
The only route for a risk position in the lean hog market is through the CME’s futures and futures options contracts. No ETF or ETN products track the price action in the lean hog or any other pork futures.
A lean hog futures contract contains 40,000 pounds. At 89.325 cents per pound, one contract is worth $35,730. The original margin is $1,870 per contract, translating to a 5.23% downpayment to control $35,730 of lean hog futures. The exchange requires variation margin payments if equity on a risk position falls below the $1,700 per contract level.
Lean hogs are heading into the peak demand and peak price season over the coming weeks. As the forward curve shows, expectations are for higher prices. However, 2025 is no ordinary year, as trade barriers and other factors could cause increased volatility in pork prices. Time will tell if pig prices fly during the 2025 grilling season.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.