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The jump in weights combined with the record high cold storage supply and stiff premium of futures to the cash market leaves futures vulnerable to a short-term sell-off. Packers are having a difficult time in moving pork product on the market and were forced to sharply discount this week and this could drag down cash markets and is likely to pull futures down as well. With a tightening supply of hogs into the late spring and with a significant reduction in poultry supply ahead, the market is likely to see the tighter supply equate to higher prices. Pork cut out values, released after the close yesterday, came in at $57.86, down $2.45 from Tuesday and down from $58.93 the previous week. Weekly average weights for Iowa/Minnesota for the week ending March 21st came in at 269.5 pounds, up from 268.7 the previous week and up from 267.5 pounds last year. Weights are increasing at a time when weights typically are in a steady decline and this suggests some market-ready hogs may be backing up in the country. April and June hogs ended the session slightly lower yesterday after trading both sides of unchanged. The market is consolidating ahead of Friday’s Quarterly Hogs & Pigs Report. The trade is looking for around a 3% decline in All Hogs and Pigs, Kept for Breeding numbers a bit more than a 2% decline and Market hogs a bit more than a 3% decline. Cash hogs in the Midwest traded 50 cents higher yesterday and were called steady to higher before the news of a sharp set back in pork cut-out values was released. The CME Lean Hog Index as of March 23 came in at 56.73, down 37 cents from the previous session and down from 59.93 the week before. This leaves April hogs at a 452 point premium. The estimated hogs slaughter came in at 424,000 head yesterday. This brings the total for the week so far to 1.271 million head, up from 1.265 million last week at this time and up from 1.171 million a year ago. Corrective breaks for the June or July hogs look like buying opportunities as the supply of all meats tapers off into the spring and early summer. This is traditionally a strong demand period for meat.
TODAY’S GUIDANCE: The jump in weights and very weak action in pork product this week leaves April at a stiff premium to the cash market and longs in a position to roll to June which is also holding a stiff premium or to just liquidate ahead of the key supply report on Friday. A tightening supply ahead should eventually support but the short-term trend looks down.
