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Big profits from the packer and the discount of futures to the cash market should help to provide some temporary support to the market, and the lower than expected slaughter pace for the past month along with suspicions that export demand remains strong are additional supportive forces. October hogs pushed sharply higher on the session yesterday, and held on to those gains to close strong. Cash hogs traded steady to $1.00 higher, as compared with trade expectations for steady to lower trade. This occurred late last week as well with traders looking for weak packer demand and lower cash on Thursday and Friday, but the cash trend and the pork cut-out value trend continues to support strong packer margins which leaves packers with the incentive to pay up in the cash market. Cash hogs are expected to trade steady to $0.50 lower for today. Packer demand has been stronger than expected. The spread between the pork cut-out and nearby futures is at the highest level since August of 2008, when China buying drove pork values to the previous record high before pork rallied to a new all-time high on Friday. The higher pork trade late Friday supported the early strong gains today. Pork cutout values released after the close yesterday came in at $97.79, up $2.30 from Friday and up from $91.19 the previous week. However, a later release of the cut-out from the USDA showed cut-out up 18 cents to $95.67. The adjustment down is still a record high, but the market remains nervous of a seasonal peak in pork values and a seasonal increase in production for the September to November timeframe. The CME Lean Hog Index as of August 19th came in at 83.78, up 1.01 from the previous session and up from 82.92 the week before. The estimated hog slaughter came in at 410,000 head yesterday. This was up from 407,000 head last week but down from 422,000 head a year ago as this time. Slaughter has been coming in below trade expectations for the past several weeks, and traders see part of the reason for the decline being due to too much heat in July and August which can slow weight gains. Pork production for the week was down 7.1% from last year, and this helped to support the market last week.
TODAY’S GUIDANCE: With a new high in pork cut-out, new sellers might be tough to find and short traders are vulnerable to covering. Look for support for October hogs at 77.47 and 76.70, with 78.75 and 79.30 as good resistance.
Hog Market Commentary – 2010.08.24
by Terry Roggensack on August 24, 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!
Big profits from the packer and the discount of futures to the cash market should help to provide some temporary support to the market, and the lower than expected slaughter pace for the past month along with suspicions that export demand remains strong are additional supportive forces. October hogs pushed sharply higher on the session yesterday, and held on to those gains to close strong. Cash hogs traded steady to $1.00 higher, as compared with trade expectations for steady to lower trade. This occurred late last week as well with traders looking for weak packer demand and lower cash on Thursday and Friday, but the cash trend and the pork cut-out value trend continues to support strong packer margins which leaves packers with the incentive to pay up in the cash market. Cash hogs are expected to trade steady to $0.50 lower for today. Packer demand has been stronger than expected. The spread between the pork cut-out and nearby futures is at the highest level since August of 2008, when China buying drove pork values to the previous record high before pork rallied to a new all-time high on Friday. The higher pork trade late Friday supported the early strong gains today. Pork cutout values released after the close yesterday came in at $97.79, up $2.30 from Friday and up from $91.19 the previous week. However, a later release of the cut-out from the USDA showed cut-out up 18 cents to $95.67. The adjustment down is still a record high, but the market remains nervous of a seasonal peak in pork values and a seasonal increase in production for the September to November timeframe. The CME Lean Hog Index as of August 19th came in at 83.78, up 1.01 from the previous session and up from 82.92 the week before. The estimated hog slaughter came in at 410,000 head yesterday. This was up from 407,000 head last week but down from 422,000 head a year ago as this time. Slaughter has been coming in below trade expectations for the past several weeks, and traders see part of the reason for the decline being due to too much heat in July and August which can slow weight gains. Pork production for the week was down 7.1% from last year, and this helped to support the market last week.
TODAY’S GUIDANCE: With a new high in pork cut-out, new sellers might be tough to find and short traders are vulnerable to covering. Look for support for October hogs at 77.47 and 76.70, with 78.75 and 79.30 as good resistance.
Tags: Hogs, Livestock
About Terry Roggensack