Traders believe the collapse last week may have fully "priced" the seasonal decline expected for the cash market into the fall. However, this is still uncertain as supply is expected to continue to grow and both slaughter and pork production is coming in better than expected.

October hogs closed 40 lower on the session Friday but up 90 from the early lows after first posting contract lows. The market managed to recover more than 80 points off of the lows with talk of the oversold condition of the market. October was down as much as 485 points from Wednesday's highs, and this may have sparked some late-in-the-week short-covering. A bounce in the pork cut-out value late Thursday may have also provided some support.

Cash markets were steady to $1.00 lower and the lean index slipped again. The CME Lean Hog Index as of September 5th came in at 75.56, down 1.73 from the previous session and down from 83.28 the week before. This leaves the October discount at only 420 points. Slaughter came in at 432,000 Friday and 336,000 head for Saturday, which drove weekly slaughter to 2.074 million head for a holiday week. This was up 2.7% from last year. Pork cutout values, released after the close Friday, came in at $78.22, down 34 cents from Thursday and down from $81.60 the previous week.

The Commitments of Traders reports as of September 4th showed Non-Commercial traders were net long 25,267 contracts, an increase of 125 for the week. Non-Commercial and Nonreportable combined traders held a net long of 11,477 contracts, down 1,934 for the week and the selling trend is negative. Commodity Index traders held a net long of 92,906 contracts, up 729.

While the recent USDA Hogs and Pigs reports suggest that hog slaughter should be running 1-2% above last year, actual US hog slaughter for the week ending August 25th came in 10.8% above last year, and this follows increases of 6.6% and 4% for the previous two weeks.

Pork production for the week ending August 25th came in at 457.6 million pounds, up from 437.5 the previous week and up 12.3% from a year ago and this follows increases of 8% and 5.3% during the previous two weeks.

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