Pork cutout values, released after the close yesterday, came in at $89.56, down $2.09 from Monday and down from $93.03 the previous week. Weakness in loins and cash bellies helped to pressure. This pushed pork values to the lowest since July 16th. The pork value looks vulnerable to increased pressure ahead due to rising pork production and the fact that rib prices have still not peaked out. Once Labor Day bookings are complete, rib weakness could add to the negative tone.
October hogs closed slightly lower on the session yesterday, with a relatively tight range for the second session in a row. The pork news helped push the market to the lowest level since August 8th in overnight action. The weak tone for the cash market continues to clash with the stiff discount of futures to the cash market. The CME Lean Hog Index as of August 17th came in at 90.37, down 66 cents from the previous session and down from 92.80 the week before. This leaves October hogs at a discount of 1500 points to the cash market and could limit the downside.
However, cash looks to remain in a steep downtrend in the weeks ahead and buyers do not seem too interested in the discount yet. The market saw choppy and two-sided trade in a narrow range yesterday but a continued surge higher in grains helped to pressure the market to close lower on the day.
Talk of improved weather for weight gain and ideas that the market is already seeing a significant increase in production due to higher than expected slaughter pace helped to pressure. The huge discount of futures to the cash market helped to limit the selling. The CME lean hog index slipped to 90.37 from 91.03 previous.
Slaughter came in slightly higher than expected at 423,000 head. Traders see this week's slaughter at the highest since September. This brings the total for the week so far to 847,000 head, up from 835,000 last week at this time and up from 839,000 a year ago.
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