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Packer profit margins are in the black and supply is coming down so the pop in pork cut-out values in the past few sessions could go a long way in shifting the psychology in the market to a more positive tilt. July hogs tested Thursday’s lows early on Friday but managed to hold support and strong buying emerged to support a run to sharply higher on the session and above Thursday’s highs. Ideas that cash hogs could trade firm this week helped to support. In addition, a jump in pork cut-out values late Thursday was seen as a positive development. Monthly pork exports for April were reported at 352.7 million pounds which was down from 370.4 pounds in March but up 2.2% from last year. Weakness in the cattle pit helped pull hogs off of the highs late in the day. The CME Lean Hog Index as of June 9th came in at 78.39, down 41 cents from the previous session and down from 80.11 the week before. This leaves July hogs right in line with the cash market. A general feeling that cash hogs could inch higher or at least stabilize this week is helping to provide underlying support. Supply is expected to continue to decline in the weeks just ahead and a sharp break in the US dollar could be seen as a positive development for export demand. The estimated hog slaughter came in at 371,000 head Friday and 46,000 head for Saturday. This brought the total for last week to 2.026 million head, up from 1.791 million the previous week but down from 2.079 million a year ago. Pork production for the week was down 2.5% from last year and cumulative production for the year is down 4.2%. Pork cutout values, released after the close Friday, came in at $83.99, up 37 cents from Thursday but down from $84.78 the previous week. The Commitments of Traders Futures and Options report as of June 8th for Lean Hogs showed Non-Commercial traders were net long 29,269 contracts, a decrease of 13,728 contracts for the week and trend-following funds reduced their net long by a similar amount and now hold a net long of just 15,897 contracts. The selling trend from the fund traders is a negative short-term force but may be nearing an end. Commodity Index traders held a net long position of 87,533 contracts, up 191 for the week. Cash is called steady to $.50 higher today and outside market forces are supportive.
TODAY’S GUIDANCE: The packer is still profitable and the market seems set to absorb improving cash fundamentals in the next week or so. We caution against turning too bullish until there is a better gauge on short-term consumer demand with mixed signals in the past few weeks. Once the market sees a clean up of the short-term supply, futures are likely in a position to bounce. A record volume day last Monday seems to have stopped the fund long liquidation selling and a near-term low could be in place.
TODAY’S MARKET IDEAS: July hog buying support moves up to 77.92 and 77.42 with 78.92 and 80.55 as near-term resistance.
Hog Market Commentary – 2010.06.14
by Terry Roggensack on June 14, 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!
Packer profit margins are in the black and supply is coming down so the pop in pork cut-out values in the past few sessions could go a long way in shifting the psychology in the market to a more positive tilt. July hogs tested Thursday’s lows early on Friday but managed to hold support and strong buying emerged to support a run to sharply higher on the session and above Thursday’s highs. Ideas that cash hogs could trade firm this week helped to support. In addition, a jump in pork cut-out values late Thursday was seen as a positive development. Monthly pork exports for April were reported at 352.7 million pounds which was down from 370.4 pounds in March but up 2.2% from last year. Weakness in the cattle pit helped pull hogs off of the highs late in the day. The CME Lean Hog Index as of June 9th came in at 78.39, down 41 cents from the previous session and down from 80.11 the week before. This leaves July hogs right in line with the cash market. A general feeling that cash hogs could inch higher or at least stabilize this week is helping to provide underlying support. Supply is expected to continue to decline in the weeks just ahead and a sharp break in the US dollar could be seen as a positive development for export demand. The estimated hog slaughter came in at 371,000 head Friday and 46,000 head for Saturday. This brought the total for last week to 2.026 million head, up from 1.791 million the previous week but down from 2.079 million a year ago. Pork production for the week was down 2.5% from last year and cumulative production for the year is down 4.2%. Pork cutout values, released after the close Friday, came in at $83.99, up 37 cents from Thursday but down from $84.78 the previous week. The Commitments of Traders Futures and Options report as of June 8th for Lean Hogs showed Non-Commercial traders were net long 29,269 contracts, a decrease of 13,728 contracts for the week and trend-following funds reduced their net long by a similar amount and now hold a net long of just 15,897 contracts. The selling trend from the fund traders is a negative short-term force but may be nearing an end. Commodity Index traders held a net long position of 87,533 contracts, up 191 for the week. Cash is called steady to $.50 higher today and outside market forces are supportive.
TODAY’S GUIDANCE: The packer is still profitable and the market seems set to absorb improving cash fundamentals in the next week or so. We caution against turning too bullish until there is a better gauge on short-term consumer demand with mixed signals in the past few weeks. Once the market sees a clean up of the short-term supply, futures are likely in a position to bounce. A record volume day last Monday seems to have stopped the fund long liquidation selling and a near-term low could be in place.
TODAY’S MARKET IDEAS: July hog buying support moves up to 77.92 and 77.42 with 78.92 and 80.55 as near-term resistance.
Tags: Hogs, Livestock
About Terry Roggensack