Weak action, as traders fear back up due to low hog slaughter
July hogs closed sharply lower on the session on Tuesday, and the market is now down for eight of the past nine trading sessions.
The selling has pushed the market to its lowest level since April 27.
Technical indicators are now oversold after steady price erosion off of the May 4 peak.
This leaves July hog futures trading near 56.27 per hundredweight, compared with the CME Lean Hog Index at 67.60, which is down from 68.70 the previous session but up from 65.75 a week before.
The USDA estimated hog slaughter came in at 397,000 head yesterday. This brings the total for the week so far to 785,000, up from 718,000 last week at this time but down from 929,000 a year ago. The pick-up in the slaughter pace is triggering increased pork production, but hogs are still backing up in the country, and weights are likely at record highs for the third week in a row.
The USDA pork cutout, released after the close yesterday, came in at $96.78, down $9.93 from Monday and down from $111.34 the previous week. This is the lowest the cutout has been since April 29.
China’s national average spot pig price, as of May 20, was up 0.29% from the previous day. Prices are up 2.0% for the week, down 13.3% for the month, down 18.2% year to date, and up 86% from a year ago.
Traders remain fearful that record weights and the slow slaughter pace will cause hogs to back up in the country. With strong demand and the potential for lost production due to forced euthanasia, pork values are strong enough to pull the cash market higher. July Hog support is at 55.77, with 60.22 and 61.47 as resistance.
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