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Lean Hog Commentary
Another day of good futures gains was noted. That makes it 4.95 in the past two days. This is the best price offered for the February contract since September 8. It even gapped higher today. The February left some open space on the charts from 57.72 - 57.80. This gap may later be used for bears on the way back down. We don't look for that gap to filled tomorrow.
Cash hogs posted their 10th day in a row of gains. The is the longest string of consecutive gains since April. Back then we saw a 16 day consecutive streak. It would be fair to say that a 10 day in a row streak of gains right in the heart of three consecutive weeks of new record kills would be a big surprise.
Packer margins are obviously the big driver here. They are now apparently racing to see who can narrow margins down from what were extreme levels. We still have to wonder if this cold spell, at the same time as the trade expected to see record kills, is also adding a small amount of cash hog premium. Storm Lake, Iowa will see non-wind chill temperatures of only 6 tomorrow morning. From Sunday through Tuesday it will range from -2 to +4 degrees. We have to point out that even after this chill ends, it won't really warm up. By next Friday the 16th, the low for that location is a sweltering 11 degrees! If cold temperatures are a factor here in supporting cash hog prices, we won't get a real reprieve anytime soon.
The morning release of new pork export numbers also helped out the bull cause. Pork exports in October came to 451.315 million lbs. We call this supportive. It was 10% over last year's October. That is better than the September pace of +3% and next to the August numbers that ran +11% yr/yr. Pork exports continue their slow but steady gains. Pork imports of 89.445 million were noted in October. This was 10% under last year. That is an improvement over the -2% in August and -8% in September.
The chicken export numbers were a disappointment. We exported 566.591 million lbs of chicken in October. That was 8% over last year. We call that a clear disappointment as last year's exports were 20% under October of 2014. We still have a ways to go in fixing this bird flu related export problem. It is also a problem as the chicken industry continues its slow and steady expansion. The previous month's numbers, September, were 22% over last year.
While we do not expect this rally to last much more than a few more days the market has spoken. We'll stand aside and let the market complete the move it is intending. New highs for the uptrend were made again today.
- (12/5) Sold February 55.25, risk filled 12/7 57.85 for -$1,040.