Seasonal Peaks and Structural Scarcity: Why Lean Hogs and Cattle Futures Offer Strategic Bullish Opportunities

The agricultural commodities markets have long been shaped by seasonal rhythms and supply-demand imbalances. Nowhere is this more evident than in the futures markets for lean hogs and cattle, where a confluence of seasonal demand, shrinking herd sizes, and tightening cattle supplies is setting the stage for a bullish cycle. Despite near-term technical selling pressures, the fundamentals suggest that strategic long positions in these markets could yield significant returns, particularly ahead of the critical June-July period and beyond.

The June-July Hog Price Peak: A Seasonal Anchor

Historical data confirms that June and July are the peak months for hog prices, driven by the U.S. grilling season. During this period, pork demand surges, tightening already constrained supplies. The USDA's Pork Cutout-Lean Hog spread analysis (2015–2022) reveals that prices for both hog and pork futures typically rise in tandem during summer, though pork prices often hold their gains longer due to year-round retail demand.

The underscore this pattern. For instance, the July 2014 all-time high of 133.80 USD/lbs—a record that has yet to be broken—occurred precisely during this seasonal window. Even in recent years, prices have consistently rallied in June and July, reaching an average gain of 16% year-to-date in 2024.

Declining U.S. Hog Herds: A Supply-Side Catalyst

The bullish case is further bolstered by structural shifts in hog production. USDA data shows that U.S. hog inventories have been in decline since 2020, with sow farrowing rates—critical to future supply—peaking between June and August. This timing is no coincidence: sows bred in late summer produce market-ready hogs for winter slaughter, but reduced farrowings now mean smaller herds in the coming years.

The illustrates this trend. With herd sizes down 8% since 2019 and feed costs (corn/soybean meal) remaining elevated, producers face margin pressures that could limit herd expansion. This scarcity is already reflected in slaughter rates, which fell by 23,584 head in early 2024 compared to the prior year—a sign of tighter supply ahead.

Beef's Holiday Demand Surge: A Tailwind for Hogs

Beef prices, traditionally a substitute for pork, are also climbing as holiday demand (e.g., summer barbecues, Thanksgiving) intensifies. The USDA forecasts that beef production will decline by 2% in 2025, driven by shrinking cattle herds and rising feed costs. This scarcity creates a dual effect: higher beef prices incentivize consumers to substitute with pork, boosting hog demand, while also reflecting broader inflationary pressures in protein markets.

The highlight the severity of the supply crunch. By 2026, cattle numbers could drop to levels last seen in the 1940s, with calf crops projected to shrink by 1.5% annually. This tightening aligns with the seasonal pork demand cycle, creating a perfect storm for prices.

Navigating Technical Resistance: A Buying Opportunity

While near-term technical selling—such as resistance at the 2024 highs of 84.41 USD/lbs—may pressure hog prices, these dips present entry points. The Lean Hog CVOL Index, which tracks implied volatility, has remained elevated, signaling uncertainty. Yet fundamentals suggest this volatility will resolve upward.

Traders should focus on support levels, such as the 74.90–77.325 range observed in June 2024. Breakouts above 80 USD/lbs could trigger a retest of 2014's record high. Meanwhile, cattle futures, which have lagged due to current herd sizes, could surge once the USDA's 2025 projections materialize.

Investment Strategy: Positioning for the Cycle

The evidence points to a multi-year bullish cycle for both lean hogs and cattle futures. Investors should consider:

1. Lean Hogs: Enter long positions ahead of the June-July peak, targeting the 80–85 USD/lbs zone. Use stop-losses below 75 USD/lbs to mitigate volatility.
2. Cattle Futures: Build positions by late 2024, focusing on contracts expiring in 2025–2026 to capture the supply crunch.
3. Spread Trading: Exploit the Pork Cutout-Lean Hog spread, which typically widens in summer. Buy hogs and sell pork cuts to profit from seasonal divergence.

Conclusion: A Bull Market in the Making

The combination of seasonal demand, shrinking herds, and tightening cattle supplies creates a compelling case for long positions in lean hogs and cattle futures. While short-term technical resistance and macroeconomic headwinds (e.g., interest rates) may test nerves, the structural scarcity in protein markets is undeniable. Investors who align with these trends could reap rewards as the markets navigate their way toward the next cycle peak—a peak that could eclipse even the historic highs of 2014.

In the words of the old adage: “Buy the rumor, sell the news”—but here, the news is still coming. Position early.