December hogs have closed lower for the fifth session in a row, and the turn down in open interest from an extremely high level suggests that long liquidation selling is in place. A slowdown in packer demand for slaughter last week with an active and record high supply flow is a bearish development, and if pork cutouts turn down into early December, the market is vulnerable to further short selling. While slaughter was down 3.1% from last year last week, pork production for the fourth quarter is expected to reach a record high of 7.035 billion pounds, which is up 5.8% from last year and the selling yesterday pushed this marker down to the lowest level since October 24.

MARKET IDEAS: The December lean hogs market is reaching oversold levels, however a long liquidation-selling trend looks likely if pork values turn down due to likelihood of record weekly slaughters in the weeks ahead. Resistance is at 65.35, with 63.42, and 61.97 as key support levels. Traders could consider selling a bounce if we break above these resistance levels.

 

Dec ’17 Lean Hogs Daily Chart