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The technical action turned weak yesterday and the market seemed to be on track to see follow-through selling today but a surge higher in ham prices after a surge lower the previous session has sparked short-covering in the overnight session. Perhaps we should wait for a few more sessions to see if there is truly “fire sale pricing” for hams and a potential low or if the steady rise in pork production in the weeks ahead keeps pork under pressure. Pork cut out values, released after the close yesterday, came in at $54.33, up $2.05 from Wednesday and up from $53.63 the previous week. December hogs closed moderately lower on the session yesterday with an outside day down. A 3.3% drop in pork cut-out late Wednesday and weaker cash markets helped to pressure. Hams were down sharply and traders are nervous with the supply set-up ahead. However, hams were up $8.14 to $48.46 yesterday afternoon. Slaughter looks to continue to rise in the weeks ahead, weights are already high and cold storage is near record highs. Cash hogs were mostly $1.00 lower and with the sharp break in pork product prices, traders were hesitant that packers will be willing to hold cash steady as producer marketings increase in the weeks ahead. December hogs closed at the lowest level since September 4th. The CME Lean Hog Index as of September 29th came in at 51.51, down 3 cents from the previous session and down from 52.58 the week before. The estimated hog slaughter came in at 433,000 head yesterday. This brings the total for the week so far to 1.736 million head, up from 1.724 million last week at this time and up from 1.722 million a year ago.
TODAY’S GUIDANCE: While traders were talking about weaker ham prices at mid-session yesterday, the afternoon wire showed hams up $8.14 to $48.46. This boosted cut-out values and sparked the overnight rally. There seems to be plenty of hogs around to take cash hogs lower but the volatility in the pork product is helping support. For now, we would have to believe that the market needs to see further liquidation of the herd in the 4th quarter and that the cash trend will remain down.
TODAY’S MARKET IDEAS: December hog selling resistance comes in at the 50.05-50.62 zone with 46.90 as next downside objective.
