Hog markets continued to climb higher today only by a slight margin as the Feb contract settled up .325 at 91 by the close. The market is still showing technical indicators of being overbought, and with a likely increase in the slaughter numbers coming out this week, I believe the market is looking to correct itself to the downside in the near term. The pork cutout that was released after the close yesterday came in at $97.07, which was down from Monday by over $3 and down from last week by over $4 and with basis levels back to normal, there is no support coming from there. Volume has been steady to decreasing over the past 4 sessions, indicating to me that this could be a truck going up an icy road only to lose control and possibly retrace back down to the 1st level of support around the $88 price level in the Feb contract.
December hogs were trading at a discount of $6.22 which is around the 5-year average of $6.01, so as stated previously, this is not a supporting factor anymore in the futures contract. In the international markets, China’s pork production has reached 41.5 million tons for the first 9 months of the year which is up 5.9%. China’s pork imports were down 26.5% from last year and year to date imports are down 61.2% from the previous year’s pace.
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Peter McGinn
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