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A reversal for hogs after posting a new contract low yesterday leaves the appearance that a near-term low is in place. The market seems to have the supply news to turn higher but concerns over the demand for meat in general has helped pressure both cattle and hogs. Perhaps the export pace for all meats was down early this year and this sparked a period where total production may be down but per capita production was up. The market faces declining pork production ahead and the weight data suggests that producers are mostly current with marketings. Ideas that packers were cutting production due to poor operating margins helped pressure the market in the past week but margins are improving some in the past few days and the cash market may be close to a low. While February hogs have fallen as much as 477 points off of last weeks highs, pork cut-out values were up to 58.12 yesterday from 57.42 the previous week. Cash markets were mostly steady but traders noted a higher tone in Iowa. Weekly average weights for Iowa/Minnesota last week totaled 296 pounds from 296.6 pounds the previous week and 268.6 pounds last year at this time. The CME Lean Hog Index as of January 26 came in at 58.88, up 11 cents from the previous session and up from 58.57 the week before. The estimated hogs slaughter came in at 433,000 head yesterday. Slaughter was slightly higher than expected and packer margins are “less” negative than last week so demand might not be quite as bad as expected. This brings the total for the week so far to 1.291 million head, up from 1.206 million last week at this time and up from 1.274 million a year ago. Pork cut out values, released after the close yesterday, came in at $57.62, down 52 cents from Tuesday and down from $57.91 the previous week. Feeder Pig imports from Canada for the week ending January 24 came in at 97,860 head, down from 99,690 head the previous week and compared to a 4-week moving average of 108,972. This is down from 164,349 last year at this time. The declining supply of imports from Canada combined with the lower supply from the US should tighten pork supply into the spring.
TODAY’S GUIDANCE: With a declining supply ahead and an extreme oversold condition traders may consider the reversal yesterday as a sign of a near-term low.
