The short-term cash fundamentals still look very weak into the fall and the cash market should remain in a steady downtrend. However, the October futures will eventual move to the cash market and futures remain at a much wider than normal discount to the cash. This leaves the market vulnerable to spurts of short-covering.

The CME Lean Hog Index as of August 22nd came in at 87.86, down 79 cents from the previous session and down from 91.58 the week before. October hogs closed 20 lower on the session Friday and down 750 points for the week. The market saw some early weakness but managed to hold just slightly above Thursday's contract lows and closed up off of the lows. A turn down in corn prices plus continued talk of the stiff discount to the cash market helped to support.

Strength in the grains overnight could help to pressure hog futures early today. The extreme oversold condition of the market and a bounce in pork values late Thursday may have helped the market find some support on Friday.

Pork cutout values, released after the close Friday, came in at $86.32, down 73 cents from Thursday and down from $91.19 the previous week. This is the lowest pork value since June 8th. Cash hogs traded as much as $3 lower as packers were said to have all the supply they need for the week. University of Missouri estimated that sow slaughter for the week ending August 11th came in at 10.3% higher than the previous year, which pushed the 4-week sow slaughter to 6.4% over last year.

Weekly slaughter came in at 2.265 million head, which was up 99,000 from last week and up 142,000 head from last year. The estimated hog slaughter came in at 420,000 head Friday and 149,000 head for Saturday.

The Commitments of Traders reports as of August 21st showed non-commercial traders were net long 29,550 contracts, a decrease of 3,239 for the week and the long liquidation selling pressure is seen as a short-term negative force. Non-commercial and nonreportable traders combined held a net long of 19,163 contracts, down 2,488. Commodity Index traders held a net long of 91,955 contracts, down 963.

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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.