A major reversal in the October and December hogs yesterday, coming on the heels of a similar move in the August futures on Friday, suggests the market could work lower over the near term. The reversal lower in December corn after putting in a new contract high contributed to the sell-off in hogs yesterday. Last week and into this week the deferred contracts were supported on ideas that herd liquidation would lower supply down the road, but after the October contract posted a 643 point rally in five sessions, the market appeared to get ahead of itself. Uncertainty over the global economic outlook, especially in China, raises concerns that US pork exports will fall off. Pork cutout values, released after the close yesterday, came in at $91.91, unchanged from Monday and down from $92.52 the previous week. No change in the cutout was a minor improvement over the previous two days of declines, but it was a small consolation. The CME Lean Hog Index as of July 27 came in at 96.04, up 2 cents from the previous session and up from 95.32 the week before. The estimated hog slaughter came in at 402,000 head yesterday. This brings the total for the week so far to 806,000 head, up from 800,000 last week at this time and up from 755,000 a year ago. The hog market may get some temporary support should the FOMC, ECB and BOE meetings are positively received by the markets, but the big reversals in the hog futures should not be ignored.
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