Pork Prices Plummet!
Friday's sharp rally in Lean Hog futures was short-lived, as lower cash Hog prices, weak pork cut-out values and bear-spreading wiped out most of last week's gains. News that China contracted to purchase 60 million pounds of U.S. pork was largely responsible for Friday's sharp gains, as traders short the Hog market were forced to buy back positions, triggering buy-stops along the way. Today, however, bearish fundamentals took over, with Midwest direct Hog markets reporting lower cash prices this morning, as packer demand remains soft going into the Labor Day holiday. Traders are reporting good speculative interest in the October/December bear spreads, as traders position themselves for the start of the "Goldman Roll" in early September. Technically, today’s sell-off moved prices through the widely watched 50- and 100-day moving averages, which may spur some further selling pressure by momentum traders. The next support point for October Hogs is seen at last week’s lows of 66.87, with major support at 65.67. Resistance is now found at the 50-day moving average currently at 69.12. October Lean Hogs closed at 67.70, down 2.95.
Gasoline futures have been on fire of late, rising for the fourth consecutive session as analysts expect U.S. Gasoline inventories to have fallen again last week with traders looking for an additional 2 million barrel decline for the week ending August 24th. This comes after last week’s surprising 5.7 million barrel decline, as Gasoline demand was unexpectedly strong. Some of the recent gains in Gasoline prices have come from the unwinding of Heating Oil/Gasoline spreads by large speculators, who were recently favoring Heating Oil over Gasoline as the end of the peak summer driving season nears. However, continued refinery outages and the upcoming switchover to increased production of Heating Oil versus Gasoline have supported Gasoline prices of late. Today’s rally sent October Gasoline futures above the 20-day moving average on a closing basis, which may spark further buying by momentum traders. The 100-day moving average – currently at 1.9636 – looks to be the next resistance point for October Gasoline, with support found at 1.8781. October RBOB Gasoline futures closed at 1.9485, up 0.0425.
Mike Zarembski, Senior Commodity Analyst
