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The market looks vulnerable to a continued slide over the short-term. The cold storage report on Friday indicated a strong pork export market in December but that was before the slowdown in US poultry exports and until the Russian poultry situation is resolved, the market looks vulnerable to at least some speculative long liquidation selling. The hog market pushed sharply lower on the session yesterday as a weak tone to pork values and steady/lower cash markets helped to pressure. A record net long position from speculators combined with news of a lack of progress in talks to end the poultry trade dispute with Russia helped spark the selling yesterday and the move under last week’s lows added to the selling pressures. The cold storage news for pork was bullish but the news was bearish for pork bellies and the sharp drop in bellies helped pressure futures. Fears that the pork market has reached a level which would price-out demand has also helped to spark long liquidation selling. The CME Lean Hog Index as of January 21st came in at 70.14, up 62 cents from the previous session and up from 67.80 the week before. The estimated hog slaughter came in at 425,000 head yesterday which was higher than expected and a positive sign for packer demand. This is up from 377,000 last week and up from 422,000 a year ago as this time. Pork cut out values, released after the close yesterday, came in at $75.18, down $2.00 from Friday and down from $75.71 the previous week. This is the lowest since January 14th and the weakness could leave traders concerned that packer margins and cash hog prices could ease in the next few weeks. Keep in mind; pork prices are still higher than at any point in 2009. Traders also see the possibility that “extra” poultry which is not being exported to Russia will show up in the domestic retail pipeline and compete with pork and beef at the retail level. Moving “extra” meat on the market usually means discounting and this could drag meat prices down, at least temporarily. The overbought condition of the market is also a significant concern as the COT reports on Friday showed a strong buying trend from fund traders but both the non-commercial net long and the combined spec net long positions are at a record high.
TODAY’S GUIDANCE: Look for choppy to lower trade until there is a better signal for improved poultry trade with Russia. Support for February hogs comes in at 67.45 and 66.22 with 69.07 as resistance. April hog resistance is at 70.95 and 71.27 with 68.85 and 67.15 as support.
TODAY’S MARKET IDEAS: Consider strategies which will benefit from a short-term correction and a continuation of the bull trend ahead.
Hog Market Commentary – 2010.01.26
by Terry Roggensack on January 26, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The market looks vulnerable to a continued slide over the short-term. The cold storage report on Friday indicated a strong pork export market in December but that was before the slowdown in US poultry exports and until the Russian poultry situation is resolved, the market looks vulnerable to at least some speculative long liquidation selling. The hog market pushed sharply lower on the session yesterday as a weak tone to pork values and steady/lower cash markets helped to pressure. A record net long position from speculators combined with news of a lack of progress in talks to end the poultry trade dispute with Russia helped spark the selling yesterday and the move under last week’s lows added to the selling pressures. The cold storage news for pork was bullish but the news was bearish for pork bellies and the sharp drop in bellies helped pressure futures. Fears that the pork market has reached a level which would price-out demand has also helped to spark long liquidation selling. The CME Lean Hog Index as of January 21st came in at 70.14, up 62 cents from the previous session and up from 67.80 the week before. The estimated hog slaughter came in at 425,000 head yesterday which was higher than expected and a positive sign for packer demand. This is up from 377,000 last week and up from 422,000 a year ago as this time. Pork cut out values, released after the close yesterday, came in at $75.18, down $2.00 from Friday and down from $75.71 the previous week. This is the lowest since January 14th and the weakness could leave traders concerned that packer margins and cash hog prices could ease in the next few weeks. Keep in mind; pork prices are still higher than at any point in 2009. Traders also see the possibility that “extra” poultry which is not being exported to Russia will show up in the domestic retail pipeline and compete with pork and beef at the retail level. Moving “extra” meat on the market usually means discounting and this could drag meat prices down, at least temporarily. The overbought condition of the market is also a significant concern as the COT reports on Friday showed a strong buying trend from fund traders but both the non-commercial net long and the combined spec net long positions are at a record high.
TODAY’S GUIDANCE: Look for choppy to lower trade until there is a better signal for improved poultry trade with Russia. Support for February hogs comes in at 67.45 and 66.22 with 69.07 as resistance. April hog resistance is at 70.95 and 71.27 with 68.85 and 67.15 as support.
TODAY’S MARKET IDEAS: Consider strategies which will benefit from a short-term correction and a continuation of the bull trend ahead.
Tags: Hogs, Livestock
About Terry Roggensack