The market remains in a solid uptrend but some see the upside limited for December hogs unless there is a surprise in the supply. Increasing supply into the 4th quarter could help to pressure pork values and the turn down in the overbought futures market with a reversal on Wednesday has helped to pull December back to a discount to the cash market. Sluggish pork values on Friday could spark some long liquidation selling early this week as outside forces are also negative.

December hogs closed 50 higher on the session Friday and managed to close up 280 points for the week. October closed 47 lower as traders see steady cash markets ahead, but the spot contract was able to close 415 higher for the week. The 2-day lean index jumped to 78.68 which left December hogs at a 260 point discount, and this may have provided some support. This was up from 73.96 the week before.

Slaughter came in slightly higher than expected at 431,000 head, with 194,000 for Saturday. This brought the total for last week to 2.355 million head, up from 2.345 million the previous week and up 20,000 head from last year. Pork cutout values, released after the close Friday, came in at $84.27, down 68 cents from Thursday but up from $80.49 the previous week. Weakness in loins and ribs helped to pressure.

The Commitments of Traders reports as of October 2nd showed non-commercial traders were net long 17,871 contracts, an increase of 2,926 for the week and the buying trend is seen as a short-term positive force. Non-commercial and nonreportable traders combined held a net long of 5,654 contracts, up 3,949. Trend-following fund traders saw significant short-covering for the week but remain net short 3,648 contracts. Commodity Index traders held a net long of 90,589 contracts, down a significant 3,059 for the week. Index fund selling is a short-term negative force.
 

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