April hogs closed 147 lower on the session yesterday, and closed under 90.00 for the first time since January 25th. The market saw some choppy and two-sided trade early in the session, but pushed towards new daily lows into mid-day. Another jump in pork cut-out values to their highest levels since August was thought to have helped support the market early, but traders indicated that the high premium of futures to the cash market may have sparked some liquidation selling pressure. The cash market outlook has been widely seen as being supportive for the market, and many traders see a strong uptrend extending into the spring. Packer profit margins are strong and this has also been seen as supporting solid gains in the cash market next week. In addition, talk that higher energy prices could crimp consumer demand was also seen as pressuring the market. Actual slaughter for the week ending February 12th was reported at 2.149 million head which was down 0.11% from last year. However, pork production for the same week was up 2.92% from last year due to much higher than normal weights for this time of the year. The CME Lean Hog Index as of February 22nd came in at 83.00, up 10 cents from the previous session and down from 85.19 the week before. The estimated hog slaughter came in at 413,000 head yesterday. This brings the total for the week so far to 1.650 million head, up from 1.607 million head last week at this time but down from 1.698 million head a year ago. Pork cutout values released after the close yesterday came in at $91.67, down 80 cents from Wednesday but up from $89.75 the previous week. Pork trade on Wednesday was at the highest level since August 30th. Exports now represent nearly 20% of total production, but even without the export market, pork supply looks to tighten into the spring. Pork production typically declines about 250 million pounds from the 4th to the 1st quarters. According to the USDA, this year's pork production is expected to drop 472 million pounds, the largest annual drop going back to at least 1990. Production is also expected to decline from the 1st to the 2nd quarters. The forecast for this year is for a decline of 305 million pounds compared to an average drop of around 200 million.
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