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The market seems to be in a position to recover at least part of the recent sharp losses as speculators hold a hefty net short position and the market is beginning to find bargain hunters in pork product markets. A combination of the recent collapse in the US dollar and weakness in pork values may spark increased interest from importers. June hogs opened and closed moderately higher on the session in Friday and put in the range for the day in the first half hour. Cash hogs traded steady to $1.00 lower on the session but traders believe that the big jump in hams and pork product values seen late last week will help stabilize the cash market for this week. Administration officials in the US are still working on getting other countries like Russia to drop bans on US pork as there has been no link to pork or live hogs found with the H1N1 virus. Cash hogs are called steady today and the jump in pork values late last week helped boost packer profit margins to the black after trading in the red for the past few weeks. The monthly cold storage report on Friday afternoon was considered slightly negative to the market and may suggest sluggish export demand for the month of April. The report showed end of April pork in cold storage at 614.7 million pounds which was down 7% from last year but up 3% from the previous month. The normal 10-year average change for the month of April is for the market to show an increase of near 3% so the report looks very neutral to us. The Commitment-of-Traders reports on Friday showed the market in an oversold condition and also showed trend-following funds in a short-covering mode. Trend-following funds reduced their net short position by more than 2,500 contracts to a net short of 18,190 contracts. Non-reportable traders were fairly aggressive sellers of 2,893 contracts for the week ending May 19th. The CME Lean Hog Index as of May 20 came in at 62.49, down 94 cents from the previous session but up from 60.58 the week before. Slaughter came in at 402,000 head Friday which was slightly higher than expected for a change and could be a sign of better packer demand ahead. There were 20,000 head for Saturday and this brings the total for last week to 2.057 million head, down from 2.076 million last week at this time and down from 2.101 million a year ago. While slaughter was down 2.1% from last year, pork production for the week was down just.2% due to heavier than normal weights. Pork cut out values, released after the close Friday, came in at $60.24, up 36 cents from Thursday but down from $61.40 the previous week.
TODAY’S GUIDANCE: The market may see the cash more steady this week after a pounding received in the last few weeks as pork product prices have stabilized and this could be a sign that pork was cheap enough to attract demand. Supply looks to remain below last year. June hog support comes in at 65.80 and 64.85 with close-in resistance at 66.62 and then 67.15. Look for choppy to higher trade with expectations for June to trade up to the 67.15-67.70 level soon.
