Hog Margin Outlook Deteriorates Amid Tightening Corn Supplies

The margin outlook for hog producers has changed significantly since mid-April, with the projected profit margin over a rolling four-quarter timeframe falling by approximately $33 per head. This decline can be attributed to higher feed costs due to tightening corn supplies and lower expected hog revenue resulting from heavier carcass weights, abundant domestic protein supplies, and a more competitive international pork market.

The USDA's August WASDE report tightened the 2026/27 corn balance sheet, with stronger demand more than offsetting a modest increase in production. Ending stocks are projected to be 15% below last year, while the stocks-to-use ratio is expected to fall towards 10%. Private crop tour results have also come in below USDA's current yield estimate of 180.7 bushels per acre.

The market has responded accordingly, with December corn futures rallying more than $1 per bushel from their late-June lows. For producers, a 10-cent-per-bushel increase in corn reduces projected profit margin by approximately $1 per head.