With weak packer margins, a steep downtrend in cash markets and the outlook for increasing supply into the fall, the market remains in a steep downtrend. The CME Lean Hog Index as of July 12th came in at 98.79, down 46 cents from the previous session and down from 100.66 the week before. July hogs expired at 97.07, so this leaves August and October hogs at a stiff discount to the cash market. However, with weak packer margins, continued weakness in pork prices and the possibility of higher than expected production if producers start to move some breeding stock, leaves the cash trend down and the extra meat could come from beef, poultry and pork as extreme tightness in feedgrain supply and poor pasture conditions build. Pork cutout values, released after the close yesterday, came in at $88.81, down 68 cents from Friday and down from $89.87 the previous week. This is the lowest pork market since June 12th. August hogs closed slightly higher on the session yesterday. The market traded moderately lower on the session early in the day and under 90.00 to the lowest level since June 27th. Weak packer margins and fears that the weak demand tone will persist for at least a few more weeks with a hot weather outlook helped to pressure. Producers have been moving hogs as quick as they can, with corn prices approaching record highs and a set-back in the hot weather for Wednesday through Saturday could boost supply again. Cash markets were steady to $2.00 lower at terminal locations. Slaughter came in below trade expectations at 375,000 head. This was down from 393,000 last week and down from 400,000 a year ago as this time. The higher slaughter is likely a sign of weak demand from the packer.
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