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While the cash market trend looks to remain up into May, it will be important to see higher pork cut-out values in the next few sessions or packers could begin to back away from the aggressive slaughter pace seen recently and this would be seen as a bearish development. Packer margins have shifted from positive to negative in the past week led by higher cash hog prices and a 3-day set-back in pork product prices. June hogs ended near unchanged on the session yesterday after choppy and two-sided trade. However, further weakness in pork helped drive the market lower overnight. Pork cut out values, released after the close yesterday, came in at $58.84, down $1.07 from Tuesday and down from $61.26 the previous week. Cash hogs were higher yesterday and are called higher again today but traders were unwilling to press the upside due to the premium of futures to the cash market and the weaker tone to pork cut-out values over the past few sessions. In addition, traders suspect that Iowa/Minnesota producers are active with fieldwork this week but will be active sellers in the cash market next week when heavy rain is in the forecast. The cold storage news was supportive this week but the market believes that much of the positive cash news is already priced. Weekly average weights for Iowa/Minnesota came in at 269 pounds which is down from 269.9 pounds last week but still up sharply from 265.6 pounds last year. The CME Lean Hog Index as of April 20 came in at 59.55, up 70 cents from the previous session and up from 56.72 the week before. The estimated hogs slaughter came in at 425,000 head yesterday. This brings the total for the week so far to 1.274 million head, up from 1.143 million last week at this time but down from 1.279 million a year ago. Feeder Pig imports from Canada for the week ending April 11 came in at 111,003 head, down from 112,934 head the previous week and compared to a 4-week moving average of 113,936. Total hog imports so far this year reached 1.95 million head which is down 39% from last year’s pace.
TODAY’S GUIDANCE: While the cash trend is up, the break in pork cut-out values over the past three sessions does not give the bulls confidence that the cash trend will stay up. This confidence problem is an issue with June holding a stiff premium to the cash.
TODAY’S MARKET IDEAS: Support for June hogs comes in at 71.35 with resistance at 73.27 and 74.17.
