The technical action turned a bit sour yesterday but a strong gain in pork values overnight off of the lowest level since October 29th of 2010 on Wednesday may help to provide some support. The bounce might help to rationalize the stiff premium of futures to the cash market.
Pork cutout values, released after the close yesterday, came in at $77.73, up $2.19 from Wednesday and up from $77.48 the previous week. Ribs jumped $9.16 to $119.50 but many traders do not expect this strength to continue.
December hogs closed moderately lower on the session yesterday and the hook reversal may attract some technical selling after the recent rally may have left the market a bit overbought. The market traded lower on the session into the mid-day after first trading to the highest level since August 14th. Talk of lower weights and continued thought that cash markets may bounce helped to support early. Iowa/Minnesota morning average hog prices came in at $69.85, up $1.17 on the day.
The CME Lean Hog Index as of September 18th came in at 67.63, down 5 cents from the previous session and down from 70.17 the week before. This leaves October hogs at a 722 point premium to the cash market. The premium of futures to the cash and pork weakness helped to pressure yesterday.
Slaughter came in below expectations 431,000 head which could be a sign of weaker demand from the packer. This brings the total for the week so far to 1.738 million head, down from 1.740 million last week at this time but up from 1.693 million a year ago. Actual US pork production for the week ending September 8th came in at 419.1 million pounds, down from 458.5 the previous week and down -1.5% from a year ago.
Traders will monitor pork values late today and also a monthly cold storage report. Traders look for end of August pork stocks to be up just slightly from last month. Pork stocks in August typically decline by about 1%. Frozen stocks have been at record monthly highs for each of the past four months.
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