June hogs closed sharply lower on the session yesterday with most of the losses coming early in the session followed by choppy and two-sided trading going into the close. The early selloff took prices down to their lowest levels in 13 months as continued weakness in pork values late Friday helped to pressure the market sharply lower. Weakness in the cash market added to the negative tone of the market, with prices already down as much as 637 points from last week's highs. Pork values fell to their lowest levels since December 29th last week, which many traders feel does not bode well for the short-term outlook for the cash market. Packer margins are deep in the red and it will take a sharp rally in pork values and/or sharply lower trading in the cash market in order to improve those margins. Some traders forecast higher pork values ahead as the market adjusts to a lower production base. The USDA projects a decline in pork production from the first quarter to the second quarter of 370 million pounds, which is expected to be the second largest drop on record. The CME Lean Hog Index as of April 12th came in at 82.50, up 6 cents from the previous session and down from 82.67 the week before. The steep drop in futures helped to narrow the premium of June futures to the cash market. The estimated hog slaughter came in at 413,000 head yesterday. This was up from 274,000 head last week and up from 391,000 head a year ago as this time. Pork cutout values released after the close yesterday came in at $77.85, up 84 cents from Friday but down from $78.41 the previous week. Loins and ribs recovered to trade higher and pork bellies were unchanged at $96.46, which is down from $103.29 last week.
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