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The market continues to hold a stiff premium of February hogs to the cash market but the recent set-back has helped to pull December back in line with the cash market. Cash markets look steady today and the market awaits any evidence that export demand could be picking up with the weak dollar seen as a reason to suspect better export demand soon. The market remains in an overbought condition and after a flurry of harvest activity recently, traders are a little nervous that producer marketings could pick-up soon. December hogs pushed slightly lower on the session while February was a little firm at times as the market saw some additional rolling of positions from December to February by index funds. While trend-following funds are exiting the last of their net short position on the recent rally, index funds are now net long 75,897 contracts from near 50,000 early in the summer. The buying trend has been more pronounced in recent weeks and Index funds were net buyers of 2,443 contracts for the week ending November 3rd. Strength in outside markets provided some support yesterday but weakness in the pork product late on Friday and a mixed tone to the cash market helped spark some additional selling. The premium structure and the overbought condition of the market helped to spark some of the selling as well. The CME Lean Hog Index as of November 5th came in at 55.32, up 57 cents from the previous session and up from 53.85 the week before. The estimated hog slaughter came in at 431,000 head yesterday. This is up from 428,000 last week but down from 438,000 a year ago as this time. Pork cut out values, released after the close yesterday, came in at $58.76, up 13 cents from Friday and up from $58.68 the previous week. Loins were strong to help support but the market seems to be more worried about ham prices which were down 86 cents to $56.77 from $59.23 last week at this time. The lower than normal increase in production from the third quarter to the 4th quarter (lowest in 13 years) has provided underlying support.
TODAY’S GUIDANCE: December has pulled back to near the cash market but there may be additional downside correction in order to pull some of the premium out of the February before finding support. Cash is called steady today and the market still needs to absorb a hefty near-term supply. The market is still operating under the negative influence of the sweeping reversal from November 5th and the overbought condition. December hog support is at the 55.25-54.55 zone with additional support at 54.20. February hog support is in the 61.90-61.40 zone.
