After near record slaughter for October, traders see a further increase in cold storage, which could push frozen pork stocks up for the sixth month in a row to yet another new record high for the end of October. Traders see pork stocks near 630 million pounds for the report for release after the close.
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The technical action remains very impressive with February hogs in a decisive uptrend and posting new contract highs again yesterday. The jump in pork values and hams on Friday plus a turn up in outside market forces helped to support the run higher but traders remain concerned that "once" retailers are done purchasing hams for the holiday season that product could come under additional pressure. Pork cutout values, released after the close yesterday, came in at $81.27, down 36 cents from Monday and down from $84.12 the previous week. The 3.4% drop in pork prices for the week only adds to the negative margins for the packer and could spark further weakness in the cash market next week. This was the lowest pork value since October 1st and the weakness has been led by cash bellies but hams were down $1.11 yesterday to $64.24.
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December hogs closed slightly higher yesterday in choppy trade. The market traded sharply lower into the pit opening but rallied near 85 points off of the lows to trade a bit higher on the day into the mid-session. February hogs closed moderately higher on the day and managed a new contract high. Traders have downplayed weakness in the cash market this week with talk that packer bids will jump next week. Cash belly weakness helped drag cut-out lower which helped pressure.
The CME Lean Hog Index as of November 16th came in at 79.13, down 84 cents from the previous session and down from 82.02 the week before. This leaves December hogs at a 252 point premium to the cash market. Cash hogs traded $.50-$1.00 lower due to shortened slaughter schedule this week. Slaughter came in about as expected at 434,000 head and talk of a big slaughter on Saturday helped to put a floor in the cash.
Slaughter was unchanged from last week and unchanged from a year ago as this time. This pushed slaughter for the week to 869,000 head, up 36,000 from last week and up 1,000 from last year.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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