As pointed out in recent commentary, April-May hog slaughter generally matched rates implied by the March USDA Hogs & Pigs report. 

The preliminary figure for the March 31-May 24 period reached 16.016 million head, which fell 4.5 percent under the same eight-week total from last year, while the late-March report implied an annual decline of 3 percent-5 percent.  

The chart to the right illustrates those differences; however, it also shows the first week of June’s kill reached just 1.750 million head, which represented a 6.6 percent annual decline. 

The quarterly USDA report implied June-August hog supplies would run ‘just’ 3 percent-4 percent under comparable 2013 numbers, but few in the industry seem to believe forthcoming totals will prove that large. 

The fact that the August future ended last Tuesday at 127.65 cents/pound, whereas the CME lean hog index was stated at 110.34 Wednesday morning, illustrates the bullishness built into the market. 

Indeed, as the strong July-August futures advance posted Monday and Tuesday of last week implied, traders apparently believe last week’s large reduction marked the likely start of persistently large shortfalls to be seen this summer. 

Some industry insiders reportedly expect July-August kills to fall 8 percent-10 percent under year-ago rates.  And given the number of farm outbreaks reported by the swine veterinarians in January and February, it’s rather difficult to argue with such ideas. 

Despite suspicions that the February-April price spike will continue stifling demand through at least early summer, we certainly can’t rule out a big summer resurgence. 

On the other hand, the fact that we’ve suggested protecting half of anticipated third-quarter hog marketings confirms our doubtful attitude toward the cash market’s ability to justify the premiums built into summer futures.