February lean hogs settled lower on the session at 88.40, a change of .425. Chart patterns seem to be showing that the market is in a consolidation period right now and could see a re-test of the highs in the market from late October. The price action on the day is reflected an outside down day, which is a bearish indicator. Although there was an outside down day, the volume traded in the market was very light and fundamentally the market seems to be firming up in my opinion. Chart interpretation can vary in many ways but we could be seeing a reverse head and shoulders pattern forming in the Feb contract and if it comes to fruition, I believe then the market will re-test the recent highs.
Hog slaughter for the week ending in 11/12 is expected to be a decrease in slaughter numbers from 2,492,000 head currently compared to a year ago when it was at 2,619,745 head, a 4.88% drop year over year. Production is seeing similar numbers with current estimated production at 534.3 million pounds compared to last year’s number of 567.1 million pounds, a 5.78% decrease year over year. Seasonal price pressure may persist next week, especially with packers likely trimming purchases ahead of expected slowdowns near Thanksgiving on Nov. 24. However, well-finished hog supplies remain comparatively tight, as best illustrated by last week’s extreme 6.6-pound annual drop in Iowa/southern Minnesota pig weights.
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