The sharp 3-day break in April hogs helped alleviate some of the stiff premium of futures to the cash market but the premium is still wide. Cash markets are in an uptrend and the uptrend could steepen this week due to weather which could limit marketings for the middle and the end of the week. Declining imports from Canada and a steady decline in other meat production due to low feedlot supply and slower poultry production are all seen as positive supply forces. Demand has been on and off and there were better signs for the export market last week due to the jump in ham prices. February hogs closed slightly higher on Friday but early gains were trimmed on pre-weekend profit taking and fund selling. Concerns that frigid temperatures expected this week would impact marketings and weight gain of hogs seemed to provide early support. April closed lower on the session and has already fallen 325 points from Wednesday’s peak. Cash is called steady to higher this morning as packers try to get enough inventory on hand to avoid paying up in the cold. A higher price for pork cutout on Thursday afternoon also provided early price support for futures. The CME Lean Hog Index as of January 7 came in at 53.36, up 70 cents from the previous session and up from 51.66 the week before. The estimated hogs slaughter came in at 434,000 head Friday and 212,000 head for Saturday. This brings the total for last week to 2.386 million head, up from 1.918 million last week at this time but down from 2.434 million a year ago. Pork production for the week came in at 482.1 million pounds, down 3.7% from last year. Pork cut out values, released after the close Friday, came in at $59.05, down 27 cents from Thursday but up from $54.82 the previous week. The Commitments-of-Traders reports on the weekend showed a slight buying trend from fund traders which is somewhat positive. Trend-following or managed funds decreased their net short position by 1,419 contracts for the week ending January 6th to a net short of 1.871 contracts. Index funds increased their net long position by 793 contracts to 64,532 contracts.
TODAY’S GUIDANCE: Declining meat supply should be enough to support the market on further set-backs but the stiff premium of futures to cash could keep the trade choppy. Cash has moved up near $2.00 in the past week but still at a huge discount to futures.