December hogs saw an impressive run higher last week due to "talk" that the seasonal weakness may be about finished. The typical seasonal decline in hog prices into November stems from the normal production cycle, as pork production typically increases by 400 million to 500 million pounds from the 3rd to the 4th quarters. This year, however, the USDA is forecasting pork production to increase by 740 million pounds, which would be the second highest on record.
October hogs closed 47 higher on the session Friday and up 267 points for the week as traders believe the seasonal decline in the cash market is about to end. December hogs closed 152 higher. The market traded slightly higher into the mid-session as traders saw a steadier tone for the cash market as positive. Steady trade for the cash market and ideas that producers are now current with marketings helped to support. December hogs managed to run up to the highest level since August 20th. A jump in corn values helped to limit the advance but corn looks lower today.
The CME Lean Hog Index as of September 12th came in at 69.34, down 83 cents from the previous session and down from 75.56 the week before, and this leaves futures at a significant premium to the cash market.
Slaughter came in below trade expectations at 426,000 head Friday and 262,000 head for Saturday. This brought the total for last week to 2.428 million head, up from 2.062 million the previous week and up from 2.291 million a year ago. This was the third largest weekly slaughter on record and the largest in 4 1/2 years.
Pork cutout values, released after the close Friday, came in at $77.95, up 47 cents from Thursday but down from $78.22 the previous week.
The Commitments of Traders reports as of September 11th showed non-commercial traders were net long 25,791 contracts, an increase of 524 for the week. Non-commercial and nonreportable traders combined held a net long of 14,214 contracts, up 2,737 for the week and the small spec buying is not necessarily supportive. Commodity Index traders held a net long of 90,268 contracts, down 2,638 for the week and the index selling is a bit negative.
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