Hog Numbers About Right on Schedule
The week’s hog kill was estimated at 2.363 million head. That was right next to our morning discussion of 2.361. This week’s kill would be 2.8% over last year. The previous four weeks averaged 3.6% over last year.
We are coming off an oddly large kill last week at 2.436. That was the second largest kill of the year. The previous two weeks are an anomaly at +6.5% and +6.0% over last year. That made up for the two previous weeks at 1.4% and 0.6% over last year. The past four weeks have been oddly shaped due to the mismatched Easter.
As it stands right now, hog numbers are coming in just about right on schedule. This week’s lower numbers, the second lowest non-holiday kill of the year, are the resumption of the general downtrend in supply into summer.
Cash hogs closed the week 0.06 higher for the IA/MN. That is a disappointment after such large gains in the previous two weeks.
NAFTA may be a done deal in the next two weeks if the current trade optimism is correct.
On the pricing end we don't have a great explanation for this market's downturn in price. June has lost 6.62 since its peak on the 19th. July, our favored vehicle for summer market bulls, has lost 5.40. The general explanation is that the market feels uncomfortable with the premiums in the summer contracts. Perhaps that belief would come about due to last week's seemingly too large kill. The lack of big gains in cash hogs this week perhaps was another, related issue. Though we could argue that last week's big kill was simply to make up for the too low numbers earlier this month, that does not matter at this time.
Though general fundamentals are coming in right as expected, the market is pricing in a more bearish situation that our models suggest it should. Just like with the sharp $20 loss in prices from February down to those lows on the 4th, we will have to let this market do what it wants at this time. The stops on our long speculative positions were filled. Though disappointing, we would rather exit with losses than attempt to grasp a falling knife even harder. We see no reason to suggest weekly kills won't fall down to the 2.250 million head range in two months’ time and for summer futures to post mid-$80's.
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