October hogs closed slightly higher on the session yesterday and rose to their highest price level since August 3rd. While traders see a continued weak trend in cash hogs into the fall, the steep discount to the cash market, a return to positive packer margins plus a rise in pork values late yesterday are factors which many traders feel could provide temporary support.
Hefty weights and the possibility that a greater than expected number of hogs move to the market due to liquidation in the industry were seen as negative factors for the hog market. Weekly average weights for Iowa/Minnesota for the week ending August 11th came in at 266.0 pounds, which is up from 265.7 pounds the previous week and up from 261.0 pounds last year. Weights typically move lower at this time of the year and many traders have anticipated that expensive corn will lead to weights would fall "more" than normal
August futures expired at 91.80 and the CME cash index is at 92.80 so October futures may have already priced in a major break in the cash market during the next six weeks. Cash markets came in mostly steady yesterday, with terminal markets showing down $1.00-2.00. China continues to attempt to buy up pork on the local market and move to frozen stocks in order to help producers avoid further liquidation of their herds.
The CME Lean Hog Index as of August 10th came in at 92.80, down 49 cents from the previous session and down from 94.18 the week before. Slaughter came in higher than expected for the second day in a row at 419,000 head, which can sometimes indicate stronger than normal demand for live inventory from packers.
This brings the total for the week so far to 835,000 head, up from 767,000 head last week at this time and up from 827,000 head a year ago. Pork cutout values released after the close yesterday came in at $93.03, up 67 cents from Monday and up from $92.80 the previous week.