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The market will need to see a steady flow of bearish cash market news to expect further weakness in futures over the near-term. The CME Lean Hog Index as of June 30th came in at 102.24, down 37 cents from the previous session but up from 100.98 the week before. The leaves August hogs near a 900 point discount to the cash market. As a result, the market may see periods of positive futures action on days when the cash market shows some strength. After falling to the lowest level since early June on Friday, the August hogs saw the highest close since June 24th yesterday as the market has rejected moving to another lower price level; at least until the cash market plays some catch-up. August hogs pushed slightly higher on the day early and saw some late strength to close strong yesterday with help seen from record high feeder cattle prices and higher trade for cattle. Strength in other commodity markets plus ideas that the futures are holding a stiff discount to the cash market helped to support. Cash hogs were steady to $1.00 lower yesterday and a called steady for today. While packers need less hogs this week for the holiday-shortened schedule, traders see an increased need for next week. Packer margins are also weak and this helped limit the support early today. The estimated hog slaughter came in at 416,000 head yesterday. This brings the total for the week so far to 418,000 head, down from 789,000 last week at this time but unchanged from a year ago. Pork cutout values, released after the close yesterday, came in at $96.20, down 33 cents from Friday and down from $100.74 the previous week. It will take steady erosion in cash hogs in the weeks just ahead to rationalize the current stiff discount of futures to the cash market.
TODAY’S GUIDANCE: The market seems to have overly discounted the potential drop in cash hog markets into mid-July. While some product prices may be under pressure, belly demand could remain strong. The downside appears limited.
TODAY’S MARKET IDEAS: August hog short-term support is at 92.60 and 91.42, with resistance at 94.73 and 95.60. Don’t rule out a bounce to 96.62 in the short-term.
Hogs: Downside Appears Limited
by Terry Roggensack on July 6, 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!
The market will need to see a steady flow of bearish cash market news to expect further weakness in futures over the near-term. The CME Lean Hog Index as of June 30th came in at 102.24, down 37 cents from the previous session but up from 100.98 the week before. The leaves August hogs near a 900 point discount to the cash market. As a result, the market may see periods of positive futures action on days when the cash market shows some strength. After falling to the lowest level since early June on Friday, the August hogs saw the highest close since June 24th yesterday as the market has rejected moving to another lower price level; at least until the cash market plays some catch-up. August hogs pushed slightly higher on the day early and saw some late strength to close strong yesterday with help seen from record high feeder cattle prices and higher trade for cattle. Strength in other commodity markets plus ideas that the futures are holding a stiff discount to the cash market helped to support. Cash hogs were steady to $1.00 lower yesterday and a called steady for today. While packers need less hogs this week for the holiday-shortened schedule, traders see an increased need for next week. Packer margins are also weak and this helped limit the support early today. The estimated hog slaughter came in at 416,000 head yesterday. This brings the total for the week so far to 418,000 head, down from 789,000 last week at this time but unchanged from a year ago. Pork cutout values, released after the close yesterday, came in at $96.20, down 33 cents from Friday and down from $100.74 the previous week. It will take steady erosion in cash hogs in the weeks just ahead to rationalize the current stiff discount of futures to the cash market.
TODAY’S GUIDANCE: The market seems to have overly discounted the potential drop in cash hog markets into mid-July. While some product prices may be under pressure, belly demand could remain strong. The downside appears limited.
TODAY’S MARKET IDEAS: August hog short-term support is at 92.60 and 91.42, with resistance at 94.73 and 95.60. Don’t rule out a bounce to 96.62 in the short-term.
Tags: Hogs, Livestock
About Terry Roggensack