While the pork cut-out value continues to advance, the fact that ribs and fresh bellies are leaders on the upside has traders concerned that the upside is quite limited. In addition, traders see the possibility of increasing supply into late November as a factor which could pressure the market.

Pork cutout values, released after the close yesterday, came in at $87.69, up $1.04 from Wednesday and up from $84.95 the previous week. This is the highest pork cut-out since August 21st. December hogs closed moderately lower on the session yesterday but well up from the mid-session lows. Talk that packers reduced bids after filling needs for the week helped to pressure the market into the mid-day. In addition, surging corn values supported bear spreading.

The market opened lower on the day and continued to push lower showing losses of near 155 on the day at the lows before a recovery bounce. The surge higher in corn values helped to support the 2013 contracts and helped to spark more active bear spreading, with December taking the bulk of the selling pressure. June hogs pushed up 80 on the day late in the session and moved into new contract highs. The surge in pork product prices this week helped to support better packer margins and has helped to support the rally but traders are nervous expecting further gains for pork because ribs and cash bellies have been the leaders on the upside. Rib demand typically peaks in the summer so traders are suspect to believe there will be active rib buyers after this week's surge. In addition, traders see a seasonal increase in supply into late November.

The CME Lean Hog Index as of October 9th came in at 81.78, up 73 cents from the previous session and up from 77.76 the week before. This leaves December hogs at a 430 point discount to the cash market. The estimated hog slaughter came in at 434,000 head yesterday. This brings the total for the week so far to 1.732 million head, up from 1.730 million last week at this time and up from 1.707 million a year ago. Monthly pork exports for August came in at 419.6 million pounds, which was up from July but down 3.1% from last year. Exports represented just 21% of total production for the month, which is the lowest since January 2011. China imports came in at 50.1 million pounds as compared with a peak of 118 million for November, 2011. South Korean imports were just 13.3 million, which was the lowest since October 2010.

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