Hog Supply Cycles and Biological Lag
Lean hogs do not suffer from slow reactions. They are built around them.
Every supply decision in hogs happens months before it shows up in slaughter numbers. By the time the market sees the result, the decision is already locked in. Futures exist to price that delay, and they do it brutally.
Why hog supply can’t respond quickly
Hogs are biological inventory. You can’t accelerate growth because prices are high, and you can’t instantly cut supply because prices are low.
Breeding decisions, farrowing rates, and weight gain all operate on fixed timelines. When demand changes, supply stays where it is. That mismatch is the core of hog cycles.
How cycles form
When prices are strong, producers expand. They retain breeding stock, increase farrowings, and push weight. That expansion doesn’t hit immediately. It shows up later, often after demand has cooled.
When prices collapse, producers contract. But again, not immediately. Hogs already in the system still have to be fed, finished, and slaughtered. Oversupply persists longer than traders expect.
The result is a repeating pattern:
- tight supply → rising prices
- expansion → delayed oversupply
- price collapse → forced contraction
- eventual tightening again
Why futures move before the data
Lean hog futures don’t wait for slaughter numbers to confirm reality. They move when expectations change.
Reports on pig crop, breeding intentions, disease risk, or export demand can all shift the expected balance months ahead. The physical hog isn’t moving yet, but price has to.
Why this creates violent repricing
Once supply is set, price becomes the only adjustment mechanism.
If the market realizes supply will be too large six months from now, futures must fall immediately to reflect that future reality. There is no gradual release valve. The adjustment happens all at once.
What traders get wrong
Most traders assume hog prices should behave like financial assets. They expect fast mean reversion and smooth trends.
Hogs don’t work that way. They overshoot because biology forces them to. By the time the imbalance is obvious, it’s already too late to fix.
Locked-In Supply Means Fast Price
Hog supply cycles exist because biology moves slowly and markets move fast. Biological lag locks supply in place, and futures do the adjusting in advance.
If you understand that, hog volatility stops looking random. It looks inevitable.