Hog markets were relatively quiet today with the December contract finishing lower by 42.5 cents and the February contract up 60 cents. There is a seasonal decline right now in the cash market which is weighing down at least the front December month contract, in my opinion. As of Nov. 17th close, the CME Lean Hog index closed 37 cents lower at 87.77, which was the lowest level since February 9th. With December’s price continuing to decline, I believe it is reflecting an attitude in the market that cash will continue to decline over the coming 4-6 weeks.
The USDA hog slaughter numbers for today came in at 488,000 head, which is 3,000 head higher from last week’s 485,000 and 8,000 head higher from last year’s 480,000. After the close on Friday, the USDA pork cutout was $91.88 which is up from $1.02 from Thursday but down from $97.03 the previous week.
On November 11th I suggested that there might be a reverse head and shoulders pattern forming in the February contract and although it looks like that could still be the case, I was of the opinion that the price action was going to happen sooner rather than later. With a declining cash market and uncertainty with China taking longer than expected to fully open up, I believe the hog market bias should be sideways to lower. February lean hogs have traded in a range from $86-$93 since March with an exception in the middle of September to the middle of October, where prices dropped $16 in 8 straight sessions and 9 out 10 before retracing near 100% back up to 92 for the first half of November. In my opinion, with weak fundamentals in the near term, Feb hogs may slide to the $86 support level before there is another significant move.
Meat markets have a shortened trading week due to the Thanksgiving holiday where market hours have a regular close on Wednesday at 1:05pm, closed all of Thursday, and re-open Friday morning at 8:30am with an early close at 12:05pm (all times CST).
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