The technical action was bullish on Friday and the fundamentals look positive into the spring but the pork market is still not responding too favorably to the declining supply. Perhaps it will take a longer period of declining production to turn the pork market more favorable and the supply last week was a bit higher than expected. Pork production last week was up 1.8% from the previous week and up.6% from last year. Hopefully, we will enter a long stretch where pork production will begin to come in 4-6% under last year. Declining feeder pig supply from Canada should also kick in soon. The hog market moved from slightly lower on the day early in the session Friday to sharply higher on the day and managed to close strong. News that cash markets were more than $1.00 higher in Iowa and expectations for declining meat supply ahead helped to support. Traders see the export glitch with Russia as temporary and ideas that the market was oversold helped drive futures sharply higher with some new buying and some short-covering and a lack of new selling pressures. The Commitments-of-Traders reports, released Friday, showed the hog market in a more negative set-up as trend-following funds shifted from a net long to a net short position and index funds remain in a long liquidation mode. Trend-following funds were sellers of 3,445 contracts for the week ending January 27th and Index funds reduced their net long position by 2,421 contracts to 48,777. The selling trend is a short-term negative force and helps explain the move to new contract lows into January 27th. The CME Lean Hog Index as of January 28 came in at 58.34, down 19 cents from the previous session and down from 58.64 the week before. The estimated hog slaughter came in at 415,000 head Friday and 133,000 head for Saturday. This brings the total for last week to 2.267 million head, up from 2.236 million last week at this time but down from 2.273 million a year ago. Pork cut out values, released after the close Friday, came in at $56.94, down 6 cents from Thursday and down from $57.81 the previous week. Feeder Pig imports from Canada last week were 97,860 head from 164,349 last year at this time. The declining supply of imports from Canada combined with the lower supply from the US should tighten pork supply into the spring.
TODAY’S GUIDANCE: The technical action is supportive and suggests a near-term low may be in place. Demand news is still somewhat negative but declining supply ahead is expected to support.