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!
A further set-back in hogs today or into early next week looks to be a buying opportunity. Cash markets are called a little lower again today but packer margins are still in the black after a tough week and a hefty supply flow and we continue to believe that the supply situation will steadily improve as we move into December, January and February. The shift to a lower production base from present is a positive set-up. The seasonal 3rd to 4th quarter gain in pork production is expected to be the smallest since 1996 and the seasonal decline in production into the 1st quarter next year is expected to be the largest since 2001. This will tighten supplies considerably. February is already at a stiff premium to cash but not much more than normal and the outlook for supply would suggest that the “up” seasonal may be stronger than normal into the first quarter. The market pushed sharply lower on the session yesterday led by a collapse in ham values and lower pork values which could lead to more weakness in the cash market into next week. Cash markets were $1.00 lower and the market is in the process of absorbing a hefty supply of heavier weight hogs in the next week or so before supply begins to taper off. The long liquidation selling helped pressure February hogs more than December as the market pulled some of the premium out of February. The CME Lean Hog Index as of November 17 came in at 54.59, down 53 cents from the previous session and down from 55.64 the week before. The estimated hog slaughter came in at 435,000 head yesterday which was higher than expected and points to firm demand from the packer. This brings the total for the week so far to 1.732 million head, up from 1.692 million last week at this time but down from 1.744 million a year ago. Pork cut out values, released after the close yesterday, came in at $56.94, up 15 cents from Wednesday but down from $57.12 the previous week. Actual US pork production for the week ending November 7 came in at 467.6 million pounds, up from 466.5 the previous week and up 0.49% from a year ago. Feeder pig imports from Canada for the year have reached 4.44 million head, down 23.5% from last year.
TODAY’S GUIDANCE: We are still in the peak supply period of the year so the market may come under pressure like yesterday if there are signs that the market is having trouble absorbing the hefty supply. However, another dry spell ahead for the Midwest could slow producer marketings and provide some stability to the cash market into early next week. Breaks still look like buying opportunities as the supply outlook tightens into December and into early next year.
TODAY’S MARKET IDEAS: February hog buying support comes in at 62.97 and 62.50 with 66.52 as next upside objective.
