July hogs closed moderately lower during yesterday's session, breaking a string of six consecutive higher closes in a row as the current futures premium to the cash market was thought to have turned the market lower later in the day. Although the declining slaughter pace and the rise in pork values is expected to help support prices, the potential for slower exports as well as higher average weights could pressure the market during the near future. Pork cutout values released after the close yesterday came in at $83.02, up 63 cents from Friday and up from $77.97 the previous week. This is the highest pork value since March 14th. Loins jumped to $108.50 from $100.12 just last week. While the rally in pork prices has helped margins, packer profit margins are still in the red and some traders feel this might diminish packer demand. The CME Lean Hog Index as of May 31 came in at 84.09, up 4 cents from the previous session and up from 85.28 the week before. This leaves July near a 6 cent premium. There is a general perception in the market that the much higher than expected slaughter pace of the past several weeks was caused by producers moving hogs ahead of normal, which could end up creating a marketing hole over the near-term which has been a factor to help support recent strong gains. Cash hogs traded $0.50 to $1.00 higher yesterday and further gains in the cash market could end up pinching margins. Slaughter came in lower than expected at 408,000 head and this can sometimes signal a weak demand tone from packers. This was up from 2,000 head last week and up from 393,000 head a year ago as this time.
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