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Lean Hog Commentary
June lean hog futures fell by -1.57 this week. Cash hogs lost 0.72 and cash pork was down 3.12. Since the mini-peak in the cash markets on February 20 cash hogs are off 8.86 and cash pork fell by 6.98. The seasonal slump into mid-April has started.
The week's hog kill totaled 2.313 million head. This was a bit smaller than our 2.332 million head morning estimate. Packers surprised the trade with an estimated 411,000 head kill today and 135,000 tomorrow. The general trade talk, including our estimate, was around 430,000 today. We knew that Indiana Packing would be down today but California's Farmer John plant was supposed to be running today and offset much of the shortfall. Today's number is 6.8% over last year. That beats the 3.9% increase posted in the past six weeks. Pork production, of 491.2 million was 6.5% over last year. That was over the +3.8% six week average.
Though hog-only traders would suggest the path for prices is a done deal there are some new entrants coming from the cattle end that wonder if we will also benefit from the Brazil story. To be clear, we are not talking about knowledgeable cattle traders speculating in hogs. That comment is in regards to the new fund entrants into cattle. On that side we are hesitant to agree. We are still dealing with a little chicken export problem here in the US.
The Head and Shoulders formation was "activated" with the break below the neckline support this week.. It implies a move down to 71.57 on the June.
As it stands we are still looking for a $77 expiration price for June futures. We would like to see a move down into the $73 area for a chance to buy before the summer rally that starts around mid-April. RN
- (3/8) Sold June 82.00 call 1.85, risk to 3.25, objective 0. Closed 1.57.