Futures reacted about, as you would expect given limit down corn trading. While nearby contracts managed to tread water the 2009 contracts fell. The main concern 2009 contracts have is that pork producers will start to limit sow slaughter if corn prices continue to fall. In the most recent three weeks of data available, sow slaughter was 10% to 12% higher than last year. We will admit that data set is limited as it is for the first three weeks of July. How is it now that corn has fallen 70 cents since then? We have said sow liquidation needs to maintain 10% or higher, compared with last year, for two to five months in a row. To justify $95 summer 2009 hog prices though, we will suggest that sow slaughter needs to be 14% higher than a year ago. On the weather side we will move from a high temperature period down to a below normal temperature period by the end of this week. That should alleviate some concerns about timely marketing. One other thing to consider here is this market may have some Olympic hopes built into the recent run higher. The Olympics run from the 8th through the 24th of August. Though purchases of US pork were completed weeks ago to hit that demand period we could be seeing some psychological impact here. In the big picture though the recent rally in the nearby August was more than expected and we are still generally neutral the August and slightly bearish the October and December contracts. We are also very concerned about those big premiums the summer contracts of 2009 have.
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