Ideas that the active slaughter pace should slow soon has helped to spark the three-day bounce off of the lows. However, weakness in the pork market and the seasonal outlook for supply to continue to build ahead may be factors to limit the advance.
Pork cutout values, released after the close yesterday, came in at $77.46, down $1.70 from Tuesday and down from $78.06 the previous week. This is the lowest pork trade since April 27th.
The CME Lean Hog Index as of September 10th came in at 71.15, down 92 cents from the previous session and down from 78.60 the week before. This leaves October hogs at a premium of 227 points to the cash market and the cash market trend is decisively lower.
The estimated hog slaughter came in at 434,000 head yesterday. This brings the total for the week so far to 1.307 million head, up from 872,000 last week at this time and up from 1.278 million a year ago.
Continued weakness in corn and fund buying in meats in general supported moderately higher closes for October and December hogs yesterday. October hogs traded higher early and to a 4-session peak but buyers backed away with uncertainty over grain prices ahead and the impact this may have on whether producers hold or reduce breeding stock. Corn was lower but meal was sharply higher after the USDA released new production totals.
In addition, average weights continue to come in higher than expected, which does not confirm trader expectations that producers are current with marketings. With high-priced feed grain, traders have expected weights to drop to well below normal due to the finishing costs, but this has yet to occur. Weekly average weights for Iowa/Minnesota for the week ending September 8th came in at 269.6 pounds from 268.2 pounds last week and from 267.2 pounds last year. The 5-year average is closer to 264 pounds.
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