Below is a sample of The Hightower Report’s 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!
While the market closed limit down yesterday, there was not much follow-through to the downside in the overnight action. However, pork production prices continued to fall led by another $4.87 plunge in pork belly prices to $127.66 from $139.83 last week at this time. Belly prices are coming down from historic highs even though the supply outlook into the summer looks tight relative to the demand. Bacon demand has been strong in the past year as more and more consumption is occurring at the restaurant and fast-food level. Pork cutout values, released after the close yesterday, came in at $91.31, down $1.12 from Monday and down from $94.82 the previous week. This is the lowest pork value since March 15th. June hogs closed sharply lower on the session yesterday and the late selling drove the market down the 300 point limit. Sell-stops were activated on the move under the March lows. The market traded slightly lower early in the session and then found aggressive fund selling to drive the market sharply lower and to the lowest level since January 5th. Cash hogs traded steady to $1.00 lower yesterday and are called steady for today. However, the further weakness in pork values suggests poor packer margins and the potential for further weakness in cash ahead. Weakness in cash belly prices was seen as a factor to spark another round of long liquidation selling from speculators and the selling continued despite news of additional tariff-free imports by South Korea. South Korea will expand tariff-free imports of pork by 20,000 tonnes, to a total of 130,000 tonnes through the end of June. The CME Lean Hog Index as of April 29 came in at 94.17, down 3 cents from the previous session but up from the week before. This leaves June hogs at a discount to the cash market. The estimated hog slaughter came in at 409,000 head yesterday. This brings the total for the week so far to 804,000 head, up from 679,000 last week at this time and up from 790,000 a year ago.
TODAY’S GUIDANCE: There is no technical sign of a near-term low but with the discount of June to the cash market during a period when slaughter might slip lower suggests that significant downside might be limited. The market slipped through key support at 93.15 for June hogs and this becomes resistance. The next key support level stands at 89.70, which is a 50% correction of the one-year rally.
TODAY’S MARKET IDEAS: Watch for signs of a short-term low for the oversold hog market. July hogs show some support at 92.77 and have become extremely oversold.
Hogs: Downside Should Be Limited
by Terry Roggensack on May 4, 2011
Below is a sample of The Hightower Report’s 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!
While the market closed limit down yesterday, there was not much follow-through to the downside in the overnight action. However, pork production prices continued to fall led by another $4.87 plunge in pork belly prices to $127.66 from $139.83 last week at this time. Belly prices are coming down from historic highs even though the supply outlook into the summer looks tight relative to the demand. Bacon demand has been strong in the past year as more and more consumption is occurring at the restaurant and fast-food level. Pork cutout values, released after the close yesterday, came in at $91.31, down $1.12 from Monday and down from $94.82 the previous week. This is the lowest pork value since March 15th. June hogs closed sharply lower on the session yesterday and the late selling drove the market down the 300 point limit. Sell-stops were activated on the move under the March lows. The market traded slightly lower early in the session and then found aggressive fund selling to drive the market sharply lower and to the lowest level since January 5th. Cash hogs traded steady to $1.00 lower yesterday and are called steady for today. However, the further weakness in pork values suggests poor packer margins and the potential for further weakness in cash ahead. Weakness in cash belly prices was seen as a factor to spark another round of long liquidation selling from speculators and the selling continued despite news of additional tariff-free imports by South Korea. South Korea will expand tariff-free imports of pork by 20,000 tonnes, to a total of 130,000 tonnes through the end of June. The CME Lean Hog Index as of April 29 came in at 94.17, down 3 cents from the previous session but up from the week before. This leaves June hogs at a discount to the cash market. The estimated hog slaughter came in at 409,000 head yesterday. This brings the total for the week so far to 804,000 head, up from 679,000 last week at this time and up from 790,000 a year ago.
TODAY’S GUIDANCE: There is no technical sign of a near-term low but with the discount of June to the cash market during a period when slaughter might slip lower suggests that significant downside might be limited. The market slipped through key support at 93.15 for June hogs and this becomes resistance. The next key support level stands at 89.70, which is a 50% correction of the one-year rally.
TODAY’S MARKET IDEAS: Watch for signs of a short-term low for the oversold hog market. July hogs show some support at 92.77 and have become extremely oversold.
Tags: Hogs, Livestock
About Terry Roggensack