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The market appears to be in an accelerating uptrend on news of potential better exports to Russia and China and on a continued strong trend toward index funds to buy hogs. In addition, trend-following fund traders are still in the process of exiting their net short positions so the market was over-weighted with buying and there was a significant lack of new seller interest. China did confirm blue-ear disease in five provinces but at levels below what has been seen in the past two years. News that China lifted bans on US pork which have been in place since the H1N1 outbreak was seen as a bullish signal but China may not be an aggressive buyer of US pork just yet and dropping the bans which did not have science to back them may just be some clean-up on trade issues ahead of a visit from Obama this month. December hogs closed lower on the session on Friday with an inside trading session in fairly light trade. Speculative long liquidation selling after the surge higher last week and ideas that the market ran up too far, too fast (Dec up as much as 552 points from the October 20th lows) helped to pressure. February hogs managed to close 42 higher on the session and moved to the highest level since July 20th and closed 302 higher on the week. Talk of continued gains in ham prices helped to support the market despite a sell-off in most other markets. Pork cut out values, released after the close Friday, came in at $58.17, down 51 cents from Thursday but up from $55.35 the previous week. Hams fell $2.41 to $57.68 but are still up from $48.60 last week at this time. The Commitment-of-Traders reports on Friday showed a general buying trend from speculators for the week ending October 27th. Trend-following fund traders reduced their net short position by 1,492 contracts to a net short of 11,978 contracts. Index funds increased their net long position by 2,393 contracts to 73,454 contracts. Managed Money traders were the strong buyers for the week and the buying trend of the speculator is a positive short-term force. The CME Lean Hog Index as of October 28 came in at 53.85, down 14 cents from the previous session and up from 53.12 the week before. The estimated hog slaughter came in at 425,000 head yesterday. This brings the total for the week so far to 2.148 million head, up from 2.142 million last week at this time but down from 2.169 million a year ago. Feeder Pig imports from Canada for the week ending October 17th came in at 97,193 head, up from 85,300 head the previous week and compared to a 4-week moving average of 92,741. Feeder pig imports for the year have reached 4.16 million head, down 23.9% from last year.
TODAY’S GUIDANCE: The market is extremely overbought technically but the trend is up and open interest is still on the rise. Traders see a solid uptrend in the cash market into the first quarter but February is already holding a $10.00 premium to the cash market. Short-term, December looks vulnerable to a set-back and position traders can look to buy February after a significant correction has occurred.
TODAY’S MARKET IDEAS: Look for stiff resistance for December hogs near 57.00 and 57.37 with 54.85 and 54.20 support.
