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While not closing higher to confirm a reversal, the spike-bottom lows yesterday for February hogs suggests that the market has rejected the idea of moving to a lower price level. The very short-term fundamentals are somewhat mixed but we would still think that the cash market trend will remain up into Mid-February. As a result, the move to a discount to the cash market may be seen as a buying opportunity. February hogs closed 40 lower on the session yesterday but up 120 points from the contract lows. Steady to lower cash in the East helped spark long liquidation selling as futures remain premium to the cash market so speculative sellers are quick to sell on days when cash is weak. However, the USDA reported late on Wednesday that average hog price in Iowa/Minnesota was $59.35, up $1.56 on the day. This came as a surprise to traders expecting lower prices. Warmer weather in the Midwest helped improve the supply flow and traders remain concerned with slow US demand and the strong dollar is discouraging exports. The trend for meat production looks to continue to decline with talk of tightening supply of all meats as a strong foundation for at least a temporary rally. Weekly average weights for Iowa/Minnesota for the week ending January 17th came in at 269.6 pounds from 270.6 pounds the previous week and 270.3 pounds last year at this time. The data suggests producers are current with marketings. Cold weather is expected to limit marketings again early next week. The CME Lean Hog Index as of January 19 came in at 58.57, up 16 cents from the previous session and up from 56.02 the week before. The estimated hogs slaughter came in at 431,000 head yesterday. This brings the total for the week so far to 1.215 million head, down from 1.279 million last week at this time and down from 1.216 million a year ago. Pork cut out values, released after the close yesterday, came in at $57.91, up 49 cents from Tuesday and up from $56.21 the previous week. Feeder Pig imports from Canada for the week ending January 17 came in at 99,690 head, down from 124,891 head the previous week and compared to a 4-week moving average of 98,506.

TODAY’S GUIDANCE: The spike bottom lows from a contract low for February Hogs leaves some appearance of a low and the low was below the current cash market. The discount is uncommon for this time of the year and this could be one of the reasons that the market snapped back so fast.

This content originated from - The Hightower Report.