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The pork market showed some signs of life yesterday and cash hogs are called steady to higher today but besides the possibility of a short-covering bounce, the upside seems limited. A liquidation of herds by producers is ongoing and weekly slaughter is likely to continue to come in above trade expectations from the last quarterly Hogs and Pigs report. July hogs closed slightly lower on the session yesterday in a tight range while August hogs and some of the deferred contracts pushed lower and into new contract lows for the second day in a row. Ideas that the premium of the deferred contracts will be pulled out of the market until producers reduce the size of their herds helped to pressure. Weakness in the stock market helped keep the demand tone bearish. Selling pressure was limited by news that Russia lifted a ban on meat imports from the state of Washington and softened their ban on Texas. However, Russian banned imports from New Jersey due to H1N1 virus. Slaughter was slightly higher than expected at 414,000 head. The estimated hog slaughter came in at 414,000 head yesterday. This brings the total for the week so far to 824,000 head, up from 819,000 last week at this time and up from 797,000 a year ago. Pork cut out values, released after the close yesterday, came in at $57.64, up 79 cents from Monday and up from $56.63 the previous week. Ribs were higher again and loins were up $2.15 to $73.11. The CME Lean Hog Index as of June 12 came in at 57.14, down 3 cents from the previous session and down from 58.79 the week before. Packer margins improved some with the bounce in loins and ribs this week but the upside seems limited by continued demand concerns and the fears of higher supply just ahead.
TODAY’S GUIDANCE: Another up day for pork cut-out values and a firm tone to the cash market today could give the market a short-term bounce but there seems to be plenty of reasons to see increasing supply ahead with uncertain demand. While oversold, slaughter is running higher than expected, weights are also too high and there is still no sign of a recovery in exports. Producers and packers are also losing money. August hog resistance comes in at 59.85 with 56.77 as next objective.
