Though the deferred lean hog contracts started the week out lower following Monday's holiday, it was interesting to see most contracts closed in positive territory. There is talk the big price decline in cash hogs and pork markets will begin to slow in a few days. So far though, there is no sign of that happening. Cash hogs were weaker on Tuesday and the Tuesday afternoon wholesale pork trade was down another $1.60. Even if or when cash hogs stabilize, Allendale does not see it lasting very long. With that in mind we would have a target of $65 for the December contract. Allendale remains bearish and will not attempt to pick a bottom.
Technically the trend is down. If the July low of 6840 is taken out, we have a gap from 6560 to 6790 left open from April to fill. There are ten cents left on the upside to fill the October gap to 7050. Allendale's own "Vital Technical Indicator" projects a major turn day for lean hogs on September 9th. Allendale recommended putting on a Bear Spread Tuesday morning with buying the February and selling the October lean hog contracts at 650 on the open. This spread settled the day at 745.
Most cattle futures contracts traded the weakness in the corn market on Tuesday. Though we are hearing good news about smaller than expected feedlot supplies ready for early September, it is not filtering into the psychology just yet. Tuesday afternoon's wholesale beef trade was down for both the choice and select cuts. While Allendale is bullish based on long-term fundamentals of lower supplies into this fall and winter, this market is simply not ready to start that up trend at this time. Technically the trend is currently down. When the technical picture improves we would like to by buyers, but for now stand aside this market.
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