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The surge higher in Iowa/Minnesota cash prices this week along with a strong recovery in the pork cut-out market is helping to support the six-day jump in June futures. The CME Lean Hog Index as of May 8 came in at 55.76, up 37 cents from the previous session and down from 59.22 the week before. While it looks like the cash index will rally sharply in the next three days, the June futures are still holding a very high premium to the cash and this may soon limit the upside. We hope that the demand for pork (export and domestic) can recovery quickly from the flu issues but we remain skeptical with export bans still in place from many countries. In addition, weights are still higher than expected and as the slaughter pace picks up due to better packer demand, pork production could come in a bit higher than expected. June hogs closed sharply higher on the session yesterday as traders saw a higher cash market and hopes of improving demand ahead as a potentially positive force. Fund buyers were noted again and some traders suspect that some of the buying was short-covering. The USDA forecast for higher exports in 2010 and ideas that the import bans from various countries will be short-lived added to the positive tone. The USDA lowered 2009 pork production by 39 million pounds and raised 2009 exports by 50 million pounds to 4.1 billion pounds but this is still down 568 million pounds from last year. For comparison, US production for one week is near 400 million pounds. Slaughter came in at 418,000 head which was well above trade expectations and may be seen as a positive force for the opening and suggests improving packer demand. This brings the total for the week so far to 822,000 head, up from 803,000 last week at this time and up from 821,000 a year ago. Pork cut out values, released after the close yesterday, came in at $60.12, up $1.14 from Monday and up from $56.01 the previous week. The average cash in Iowa/Minnesota jumped $3.31 on Friday, up another $2.72 Monday and was up $3.61 yesterday to $63.65. Cash is called steady to $1.00 higher today.

TODAY’S GUIDANCE: The June hogs are moving into part of the large gap left after the H1N1 flu and higher cash trade and a strong rally in pork is helping to support. The premium structure with high weights is still a concern and could begin to limit the advance.

This content originated from – The Hightower Report.