Summary
Morgan Stanley reported that hog futures fell last week and that higher feed costs connected to the Iran conflict are expected to shave producer profits for 2026 compared with the bank's estimates a week earlier. The futures curve places first-half 2026 producer earnings at $26 per head, down from $29 in the prior weekly estimate, and second-half 2026 at $30 per head, down from $35 previously. The firm retained an Overweight rating on Sanderson Farms, noting that commodity fundamentals remain supportive despite the need to monitor feed-cost developments.
Market detail
According to the futures curve cited by Morgan Stanley, projected producer earnings stand at $26 per head for the first half of 2026 and $30 per head for the second half. Those figures represent a week-over-week decline from $29 and $35 per head, respectively. Despite that step-down, the curve still implies a modest improvement in producer profitability on a year-over-year basis in 2026.
The bank contrasted its outlook with consensus estimates that foresee a 60% year-over-year decline in Sanderson Farms' hog production segment.
Processing and cutout metrics
Packer margins held steady week-over-week at $8.2 per head last week, as reported by Hedger's Edge. Those margins remain above the $3.6 per head recorded in the same week a year earlier.
Pork cutout prices rose 2.9% year-over-year last week. Specific primal movements included an 8.5% year-over-year increase in belly prices, reversing a 2.6% year-over-year decline recorded the week before. Trim prices gained 9.8% year-over-year, after a 1.7% drop in the prior week. Ham prices fell 6.2% year-over-year, compared with a 0.3% decrease the previous week. Slaughter volumes declined 1.0% year-over-year for the week.
Feed costs
On the feed-cost front, corn prices were 1.9% lower year-over-year but rose 1.4% week-over-week. Soybean meal showed firmer movement, increasing 6.4% year-over-year and 3.5% week-over-week. Morgan Stanley linked the upward pressure on feed prices to developments associated with the Iran conflict and flagged those costs as an item to watch.
Analyst stance
Morgan Stanley maintained an Overweight rating on Sanderson Farms, stating that while feed-cost trends require monitoring, broader commodity fundamentals remain supportive of producers. The bank's adjusted per-head profit projections reflect the week-over-week rise in feed costs, even as the futures curve points to modest year-over-year improvement for 2026.