The discount of October to the cash market is much wider than normal and this, combined with the oversold technical condition of the market could leave futures vulnerable to periods of short-covering support. However, the trend in the cash market looks to remain down in the weeks ahead as weights are higher than normal and the slaughter pace is picking up steam. Add in some producer liquidation of females and weekly production levels look burdensome.

Pork cutout values, released after the close yesterday, came in at $84.72, down $1.60 from Friday and down from $91.65 the previous week. This is the lowest pork value since June 7th. Ribs were down sharply and cash bellies fell $10.55 to $125.73.

October hogs closed moderately higher on the session yesterday and managed to hold onto to the mid-session gains into the close. The market saw a turn higher with talk of the oversold condition of the market and ideas that shorts did not want to get caught in a short-covering spurt due to the wide basis. There was also some talk of interest in US pork for export but this could not be confirmed.

The CME Lean Hog Index as of August 23rd came in at 86.84, down 1.02 from the previous session and down from 91.03 the week before. This leaves October futures at a 1350 point discount to the cash market, which is not as wide as the 2000 point discount a few weeks ago but still wider than the 5-year average for this time of the year at 630 points.

Cash news remains weak as the move down in pork values does not leave packers will "reason" to pay up for live inventory. Cash markets were steady to $2.00 lower and traders see a continued downtrend over the near-term. A turn down in corn prices plus continued talk of the stiff discount to the cash market helped to support the market yesterday.

Slaughter came in well above trade expectations at 432,000 head. This was up from 424,000 last week and up from 423,000 a year ago as this time.

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