The market continues to recover from early session lows to close near the highs, as the market struggles to attract aggressive selling on weakness. This may stem from the discount of futures to the cash market even though the spread continues to narrow. The cash/futures relationship is narrowing due to the steep drop in cash markets in recent days. Iowa/Minnesota average direct trade was at 70.75 yesterday, down $1.44 from Friday and down nearly $5 in a week.

Hog weight data continues to remain high even with high corn prices and the discount of futures to the cash market. Iowa/Minnesota weekly average weights came in at 268.2 pounds from 268.6 pounds last week but still up sharply from 263.5 pounds last year. October hogs traded as much as 87 lower on the day early in the session yesterday but closed slightly higher, which is the highest close since August 21st.

A supportive tone to outside market forces and higher trade in cattle helped to support and the discount of futures to cash was also seen as a potential supportive force. The CME Lean Hog Index as of August 30th came in at 80.29, down 1.60 from the previous session and down from 86.84 the week before.

Traders see a continued flow of supply on the market which could keep the cash market in a steep downtrend. Cash was $.50 to $2.00 lower on the session yesterday and traders see weak pork values, slaughter running 6% or more above last year for the past three weeks and high weights as factors to pressure.

Slaughter came in higher than expected at 435,000 head. This brings the total for the week so far to 437,000 head, down from 863,000 last week at this time but up from 428,000 a year ago. Pork cutout values, released after the close yesterday, came in at $80.63, down 85 cents from Friday and down from $84.72 the previous week. This is the lowest pork value since May 29th and suggests that the tone in the cash market could stay weak into the end of the week. The spring and summer of 2013 contracts remain well supported by ideas of tightening pork and protein supply by next summer.

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