Lean Hogs Jun '25 (HEM25)

Description

Hogs are generally bred twice a year in a continuous cycle designed to provide a steady flow of production. The gestation period for hogs is 3-1/2 months, and the average litter size is nine pigs. The pigs are weaned at 3-4 weeks of age. The pigs are then fed to maximize weight gain. The feed consists primarily of grains such as corn, barley, milo, oats, and wheat. Protein is added from oilseed meals. Hogs typically gain 3.1 pounds per pound of feed. The time from birth to slaughter is typically six months. Hogs are ready for slaughter at about 254 pounds, producing a dressed carcass weight of around 190 pounds and an average of 88.6 pounds of lean meat. The lean meat consists of 21% ham, 20% loin, 14% belly, 3% spareribs, 7% Boston butt roast and blade steaks, and 10% picnic, with the remaining 25% going into jowl, lean trim, fat, miscellaneous cuts, and trimmings.

Futures on lean hogs are traded at the CME Group. The futures contract is settled in cash based on the CME Lean Hog Index price, meaning that no physical delivery of hogs occurs. The CME Lean Hog Index is based on the 2-day average net price of slaughtered hogs at the average lean percentage level.

Prices - CME lean hog futures prices (Barchart.com symbol HE) moved higher in early 2025 after the Q1 USDA Hogs & Pigs Inventory report showed the US hog herd on March 1, 2025, unexpectedly declined. However, gains in hog prices were limited in Q1 by US trade policies. Increased tariffs on Mexico and China, the two largest importers of US pork, threatened to reduce US pork exports. China retaliated against US tariffs, imposing duties of more than 100% on US pork products, effectively shutting down US pork exports. Hog prices rallied into Q2 and posted a 3-year high of 113.70 cents per pound in June. The lower US pork exports prompted hog producers to reduce production. Smithfield Foods, the largest pork producer in the US, announced in April that it would cut its hog production by 13% to 10 million hogs over the medium term. The Q2 USDA Hogs & Pigs Inventory report showed that sows held back for breeding in Q2 dropped to a 10-year low on June 1. Hog prices then trended lower into Q4, posting a 1-year low of 77.350 cents per pound in November. The outlook for expanded US pork production pressured prices after the Q3 USDA Hogs & Pigs Inventory report showed the US hog herd on September 1 rose to a 2-year high of 74.472 million hogs. However, hog prices rebounded into year-end after the USDA's December cold storage report showed that pork stocks in US cold storage as of November 1, 2025, fell to a 21-year low of 371.27 million pounds. Hog prices finished 2025 up by +4.7% yr/yr at 85.10 cents per pound.

Supply - The number of hogs on world farms as of January 1, 2026, fell by -0.7% yr/yr to 751.095 million head. The number of hogs in the US as of January 1, 2026, fell by -1.7 yr/yr to 73.200 million head. The countries with the largest number of hogs as of January 1, 2026, were China (with 56.6% of the world's hogs), the European Union (17.1)%, the US (9.7)%, and Brazil (4.6)%.

Demand - The federally-inspected hog slaughter in the US in 2025 fell by -1.1% yr/yr to 127.630 million head.

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