Higher pork trade and continued media reports of tightening supply ahead helped to support a bounce overnight. Pork cutout values, released after the close yesterday, came in at $78.80, up 46 cents from Monday and up from $76.42 the previous week. This is the highest pork trade since September 11th. Both ribs and loins pushed to the highest level in over a week, and this has helped support.

The CME Lean Hog Index as of September 21st came in at 70.35, up 1.42 from the previous session and up from 67.96 the week before. The jump in cash markets over the past week has helped to support the market but the upside looks limited ahead as production is still expected to swell to near 2-4% above last year into the end of the year.

The primary reason for the normal seasonal weakness in pork into late November is the increase in supply. Pork production typically increases by about 400 to 500 million pounds from the 3rd quarter to the 4th quarter. Production is expected to increase by 740 million pounds this year, which would be the second largest increase on record and would indicate a stronger than normal down seasonal into late November.

December hogs closed moderately lower on the session yesterday and the hook reversal might attract some technical selling. The market pushed to the highest level since August 3rd on continued expectations that higher pork values could support a continued uptrend in cash hogs into October.

However, weakness in cattle, ideas that the market is overbought and ideas that the futures premium to the cash is a bit overdone helped to trigger a sell-off and a move lower on the day. Talk that supply could tighten ahead along with higher trade in the pork cut-out value this week helped to support.

The estimated hog slaughter came in at 437,000 head yesterday, which was higher than expected. This brings the total for the week so far to 873,000 head, up from 871,000 last week at this time and up from 855,000 a year ago.
 

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