It should not take much in the way of positive news for the pork industry or some stability in the global economy to see a significant advance in pork prices. Keep in mind, trend following fund traders have recently shifted from a net short to a slight net long position and any technical action which helps confirm the November 6th and the November 18th lows could spark increased buying from managed funds. Slaughter levels should peak soon and begin to drift lower into February and poultry production is expected to fall off rapidly in the December and January time frame. Cattle feedlot supply is tightening and non-fed slaughter has been high for the past few years so mass breeding stock liquidation for hogs or cattle is unlikely. The hog market pushed moderately higher on the session yesterday as the trade reacted positively to the news of a jump in pork cut-out values from late Tuesday. In addition, expectations for continued declining meat production in the months ahead and expectations that recessionary demand will favor pork over beef helped support. A steady tone in the cash market and ideas that poultry production will continue to fall into December and January helped provide underlying support.
The pork cutout, released after the close yesterday, came in at $56.44, down 26 cents from Tuesday and down from $58.13 a week ago. The CME Lean Hog Index as of November 17th came in at 52.55, up 28 cents from the previous session but down from 53.74 a week before. The estimated hog slaughter came in at 436,000 head yesterday. This brought the total for the week so far to 1.3 million head, up from 1.274 million last week at this time and up from 1.287 million a year ago. Slaughter was higher than expected yesterday which is a supportive force. Weekly average weights for the week ending November 15th came in at 267.6 pounds, up from 267 the previous week but down from 268.2 pounds last year. Feeder Pig imports from Canada for the week ending November 15th came in at 126,839 head, up from 116,424 head the previous week and compared to a peak of 163,829 on March 13th.
The market seems to have the fundamental set-up to begin an uptrend into early 2009 but the bearish deflationary outside market forces may limit the upside short-term. Any stability in poultry exports or a sign that prices have reached a low should spark renewed buying interest in pork. Meat production is expected to move lower into December and into early next year.