The market was set-up to see a significant set-back off of Monday’s peak but news of a sharp jump in ham and loin prices in the afternoon pork wire could help ease concerns for a further set-back in cash markets and could also help to narrow the steep losses from packers for their operating margins. Slaughter came in at just 393,000 head yesterday, about 15,000 head below trade expectations which could indicate weaker packer demand and lower bids for cash markets ahead. However, pork cut out values, released after the close yesterday, came in at $55.55, up $1.32 from Tuesday and up from $54.05 the previous week. August hogs closed sharply lower on the session yesterday as speculative sellers turned more active with a weak demand tone and a premium of futures to the cash market helping to limit the support. Cash markets were steady on the day but this failed to ease concerns with consumer demand, weak pork values and heavy losses by the packer. Traders suspect that cash will come in steady to lower today as packers seem to have quickly filled their needs for the week. Iowa/Minnesota average cash market yesterday was down 90 cents to $56.55. A strong dollar and weak cut-out values from late Tuesday added to the bearish tone. Weekly average weights for Iowa/Minnesota came in at 263.2 pounds, down from 265.1 pounds the previous week but still up from 259.6 pounds last year at this time. Weights typically fall at this time of the year but weights have dropped sharply in the past few weeks. The CME Lean Hog Index as of July 6 came in at 58.97, up 10 cents from the previous session and up from 58.86 the week before. Feeder Pig imports from Canada for the week ending June 27 came in at 100,485 head, up from 93,884 head the previous week and compared to a 4-week moving average of 96,199. Feeder pig imports for the year have reached 2.68 million head, down 24.6% from last year. Lower feeder pig imports combined with the sharp drop in corn prices of the past several weeks could ease concerns for a continued liquidation trend from producers.
TODAY’S GUIDANCE: The bears were in control yesterday with weaker cash markets and very poor packer margins but the surge in pork cut-out values yesterday led by the ham market may be an indication of better than expected demand for exports. This could support a bounce to key resistance.