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The continued weakness in pork product prices suggests that supply is too high or that pork exports have taken another step down. If exports stay slow, US consumers need to absorb more pork and it may take cheaper prices to do so. Hams fell sharply earlier this week and this was to be expected when retailers are done booking for the Easter holiday ahead. However, hams, loins and bellies were all moderately lower overnight dragging pork cut-out down to $55.00. Pork values were near 55.00 in early March and also late last year. On April 1st last year, pork cut-out values move from 55.00 to near 82.00 into late May. The CME Lean Hog Index as of March 30th came in at 57.74, up 28 cents from the previous session and up from 56.74 the week before. Last year, the 2-day lean hog index moved from 54.39 on April 1st to 82.73 on May 15th. The rally this year should also be stronger than the typical seasonal rally as the drop in pork production into the 2nd quarter is the second highest drop in history. Last year was the largest drop. The 5-year average 2-day lean index as of April 1st is 61.11, climbing to 76.52 by May 15th. April hogs closed slightly lower on the session yesterday as a firm tone to the cash market helped support. June pushed moderately lower on the session as weakness in hams and pork product helped spark some selling and ideas that the rally on Tuesday was overdone added to the negative tone. News that average weights are not declining which is seasonally expected was also seen as a negative force. Talk that packer margins remain in the red and that meat demand is still not picking up this spring due to poor weather may have sparked some selling as well. The estimated hogs slaughter came in at 424,000 head yesterday. This brings the total for the week so far to 1.264 million head, down from 1.271 million last week at this time and down from 1.287 million a year ago. Pork cut out values, released after the close yesterday, came in at $55.00, down $1.77 from Tuesday and down from $57.86 the previous week. Hams fell $1.97 and loins dropped $4.46 to $66.26. Sluggish export demand could be a factor which is pressuring pork product. The market is probing for a seasonal low.
TODAY’S GUIDANCE: Outside markets are looking past the current weak economic news and expecting a solid recovery in the US and world economy but this is more difficult in livestock than in other markets. Near-term supply appears too burdensome to absorb at current price levels and the market acts like exports are very slow. Weak cash should pressure April today and spark selling in June as well.
