Supply is not quite as high as expected and packers are forced to bid up available supply to meet commitments, and this has helped support solid gains in recent weeks. The market is also anticipating smaller supply for next year and the possibility that tight supply in other countries where producers liquidated breeding stock quickly could purchase US pork has added to the positive tone. With packer margins already in the black, the surge in all pork values overnight should help to spark additional buying from speculators and higher cash markets ahead.
December hogs closed sharply higher on the session yesterday with talk of tightening supply and some hope for increased exports ahead "if" other countries reduced their herd too quickly helped to support. Futures surged higher to push up to the highest level since August 2nd as talk that pork is cheap relative to beef and a positive cash market outlook due to talk of tightening pork supply helped to support. With hams leading the pork rally this week, traders are a bit hesitant to chase the market higher but fund buyers remained active again.
However, Pork cutout values, released after the close yesterday, came in at $83.90, up $3.00 from Monday and up from $78.80 the previous week. This is the highest pork value since August 27th and hams, bellies and loins were all sharply higher. Iowa/Minnesota hogs traded $3.00 higher, which added to the strong buying.
The CME Lean Hog Index as of September 28th came in at 76.12, up 1.04 from the previous session and up from 70.35 the week before. This leaves December hogs at a premium of near 75 points. The estimated hog slaughter came in at 436,000 head yesterday. This brings the total for the week so far to 873,000 head, unchanged from last week at this time but up from 850,000 a year ago.
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