Hog Numbers Delayed
At the time of this writing, USDA’s Friday afternoon report showing the estimated kills and production totals is delayed.
Our original estimate for the week has been brought down to 2.239 million head. That would only run 1.1% over last year. It would also seem to suggest the past four weeks of heavy 2.1% - 3.2% year/year kills are now over. The trade is not quite sure about the coming supply flow.
This whole supply flow issue, and the uncertainty about it, can imply a massive range of prices for December hog futures. Our July AgLeaders Conference expiration target was $61. If the past four weeks of heavier-than-expected kills continues into Q4, then you can argue down to $54. From a trade psychology issue though, almost everyone is expecting some type of turnaround right now. We may see an outsized price reaction to a minor story.
At one point today, soon after the market open, October lean hogs were up a sharp 2.47. By the end of the day it was down 67¢. That is quite a rejection. Though we fully agree with the idea this market could be ready for higher prices from a psychology standpoint, we don't have the news story to justify it. We are still holding the hedge on December futures at 65.42. This covers all hogs through February.