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The market saw a nice bounce yesterday but the cash fundamentals still look sloppy into next week as weakness in pork values this week and ideas that the strong dollar and a weaker global economy view could hurt US exports has helped to pressure. August hogs rebounded off of Tuesday’s lows buoyed by the sharply higher action in corn. A slightly lower dollar and slightly higher stock markets were also supportive, but limit up action in corn and the strong action in the cattle market were likely the dominant influences. Higher corn values are supportive to the December and beyond contracts but might be considered negative for nearby contracts. On the negative side are expectations that packers will cut back operations sharply over the holiday weekend, which could cause a backup of animals in the country. Weights are already high and at least three plants will close on Friday and most on Monday. Weekly average weights from Iowa/Minnesota for the week ending June 26th came in at 269.7 pounds, down from 270.6 the previous week but still up from 265.1 pounds last year. Weights remain well above last year and the 5-year average and should be headed lower at this time of the year so the drop this week is NOT considered supportive. The CME Lean Hog Index as of June 28th came in at 81.11, down 7 cents from the previous session and up from 80.34 the week before. The estimated hog slaughter came in at 403,000 head yesterday. This brings the total for the week so far to 1.199 million head, up from 1.165 million last week at this time but down from 1.246 million a year ago. Pork cutout values, released after the close yesterday, came in at $81.80, down 86 cents from Tuesday and down from $83.80 the previous week. This is the lowest pork value since June 16th. Rib prices have fallen sharply in the past few sessions; an indication that retailers are done purchasing for the holiday weekend. Feeder Pig imports from Canada for the week ending June 19th came in at 91,958 head, up from 84,727 head the previous week and compared to a 4-week moving average of 86,357. Feeder pig imports for the year have reached 2.27 million head, down 8.7% from last year.
TODAY’S GUIDANCE: It will be important to see a jump in pork cut-out values early next week as a slowdown in slaughter on Friday and plant closures on Monday should tighten near-term supply. Demand indicators are weak this week and this should be seen as a limiting force for rallies and might encourage more long liquidation selling. A potential back-up of market-ready hogs in the country is possible, which has added to the short-term negative tone.
TODAY’S MARKET IDEAS: August hog resistance comes in at 82.87 and 83.40 with next good support back at 79.47. The market may need to correct the overbought condition before building another base of support. Watch for choppy to lower trade into next week.
Hog Market Commentary – 2010.07.01
by Terry Roggensack on July 1, 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 saw a nice bounce yesterday but the cash fundamentals still look sloppy into next week as weakness in pork values this week and ideas that the strong dollar and a weaker global economy view could hurt US exports has helped to pressure. August hogs rebounded off of Tuesday’s lows buoyed by the sharply higher action in corn. A slightly lower dollar and slightly higher stock markets were also supportive, but limit up action in corn and the strong action in the cattle market were likely the dominant influences. Higher corn values are supportive to the December and beyond contracts but might be considered negative for nearby contracts. On the negative side are expectations that packers will cut back operations sharply over the holiday weekend, which could cause a backup of animals in the country. Weights are already high and at least three plants will close on Friday and most on Monday. Weekly average weights from Iowa/Minnesota for the week ending June 26th came in at 269.7 pounds, down from 270.6 the previous week but still up from 265.1 pounds last year. Weights remain well above last year and the 5-year average and should be headed lower at this time of the year so the drop this week is NOT considered supportive. The CME Lean Hog Index as of June 28th came in at 81.11, down 7 cents from the previous session and up from 80.34 the week before. The estimated hog slaughter came in at 403,000 head yesterday. This brings the total for the week so far to 1.199 million head, up from 1.165 million last week at this time but down from 1.246 million a year ago. Pork cutout values, released after the close yesterday, came in at $81.80, down 86 cents from Tuesday and down from $83.80 the previous week. This is the lowest pork value since June 16th. Rib prices have fallen sharply in the past few sessions; an indication that retailers are done purchasing for the holiday weekend. Feeder Pig imports from Canada for the week ending June 19th came in at 91,958 head, up from 84,727 head the previous week and compared to a 4-week moving average of 86,357. Feeder pig imports for the year have reached 2.27 million head, down 8.7% from last year.
TODAY’S GUIDANCE: It will be important to see a jump in pork cut-out values early next week as a slowdown in slaughter on Friday and plant closures on Monday should tighten near-term supply. Demand indicators are weak this week and this should be seen as a limiting force for rallies and might encourage more long liquidation selling. A potential back-up of market-ready hogs in the country is possible, which has added to the short-term negative tone.
TODAY’S MARKET IDEAS: August hog resistance comes in at 82.87 and 83.40 with next good support back at 79.47. The market may need to correct the overbought condition before building another base of support. Watch for choppy to lower trade into next week.
Tags: Hogs, Livestock
About Terry Roggensack