How Feed Costs Transmit Into Hog Prices

Feed costs do not move hog prices the way traders expect. Corn and soybean meal don’t flip a switch that immediately revalues hogs. The transmission is slower, indirect, and often misunderstood.

Feed costs change behavior first. Prices respond later.

Feed is the dominant variable producers can’t escape

Feed is the largest ongoing cost in hog production. When feed prices rise, producers don’t hedge it away emotionally. They adjust decisions that affect supply months down the line.

Those decisions include herd expansion, contraction, market weights, and how aggressively animals are pushed through the system. None of that shows up instantly in slaughter numbers.

Why higher feed doesn’t always push hog prices up

A common mistake is assuming higher feed automatically means higher hog prices. That only holds if producers can successfully pass costs forward.

When demand is weak or exports slow, higher feed costs don’t raise hog prices. They compress margins instead. Producers absorb losses until they’re forced to change behavior.

Behavioral changes are the transmission mechanism

When feed stays expensive long enough, producers start cutting back.

They reduce breeding, slow expansion plans, and in some cases push hogs to market earlier to limit exposure. These adjustments don’t remove supply immediately. They alter future supply expectations.

That’s when futures start moving.

Why futures react before cash markets do

Lean hog futures are pricing what supply will look like later, not what it looks like today.

If feed costs signal that future production will shrink, futures move ahead of confirmation. Cash markets lag because hogs already in the pipeline still have to be fed and sold.

The asymmetry of feed shocks

Feed price spikes and feed price collapses do not transmit symmetrically.

Sharp feed increases can trigger fast repricing if they threaten future supply. Feed declines often take longer to matter, because expansion decisions are slower and more cautious.

Why traders get chopped up here

Traders who watch feed markets without understanding the lag expect immediate correlation. When hogs don’t respond, they assume the relationship is broken.

It isn’t broken. It’s delayed.

Feed costs reshape the future, not the present. Lean hog futures exist to trade that difference.