Pork on sale
Lean Hog futures continue to buck the trend of higher commodity prices, as lower cash hog prices and higher slaughter figures keep futures prices under pressure. Last week’s hog slaughter totaled 2,242,000 head, up nearly 5% from last year. Producers have not decreased their breeding stocks as much as expected, despite sharply higher feed costs. Friday’s USDA monthly cold storage report was deemed bearish, as ham stocks hit a record 146.9 million pounds -- 6.7 million pounds above the previous high. Pork Belly stocks came in at 22.681 million pounds, which was well above pre-report estimates. Commodity funds have been net-long Lean Hog futures, but the recent sharp break in prices has been partly due to the liquidation of long positions by these large, speculative accounts. Though October Hogs are trading well below the CME 2-day Lean Hog index, traders continue to sell the October contract, with spreaders moving out of October and into the December contract, as expiration of the October futures comes near.
Looking at the daily chart for October Lean Hogs, we notice prices accelerated to the downside once support at 65.00 gave way last week. Prices remain well below all the major moving averages, but the 14-day RSI has moved into extreme oversold levels with a reading of 12.77. With Friday’s bearish cold storage report out, some weak bears may cover their short positions, especially if prices open lower on Monday morning. This may cause a short-covering rally if buy stops can be triggered. 60.00 is seen as support for October Hogs, with resistance found at 63.50. October Lean Hogs closed on Friday at 61.35, down 1.02.
Mike Zarembski Senior Commodity Analyst
