While the market has seen a strong and steady rally over the past month, the open interest is down about 25,000 contracts during the period and traders see the market as short-term overbought. The discount of futures to the cash market has limited the selling pressures and a strong product market plus positive packer margins have helped support the impressive cash market rally. However, the market faces a continued seasonal uptrend in supply in the weeks ahead, and this could help limit the advance.

December hogs closed just 5 points higher on the session yesterday with choppy and two-sided trade and an inside trading session. June closed lower for the third session in a row yesterday and pushed to a 5-session low overnight.

While pork product traded higher again Monday and to the highest value posted since August 21st, traders believe that pork could top out soon if supply continues to push seasonally higher. Pork cutout values, released after the close yesterday, came in at $87.79, down 7 cents from Monday but up from $85.69 the previous week. Cash markets traded steady to $.50 higher on the day and the premium of futures to the cash market helped to provide support for the recovery into the mid-session.

The CME Lean Hog Index as of October 12th came in at 82.98, up 34 cents from the previous session and up from 80.46 the week before. This leaves the December hogs at a 435 point discount to the cash.

The estimated hog slaughter came in at 433,000 head yesterday. This brings the total for the week so far to 866,000 head, down from 869,000 last week at this time but up from 854,000 a year ago. Weekly average weights jumped to 272.2 pounds from 271.3 pounds last week and back up to the same level of last year. Weights were higher than normal last year, with the 5-year average weight near 268 pounds.
 

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