With the exception of Tuesday morning’s pullback, the December Lean Hogs market continues to push higher as slaughter continues to come in below trade expectations. Traders should monitor the weekly weight data closely for signs that hogs are backing up in the country. If not, the recent USDA Hogs and Pigs report may have overestimated the pig supply. Loins hit a one week high, and fresh belly prices reached $136.37, up from $128.10 a week ago. The stiff discount of futures to the cash market helped to spark some short-covering for December hogs, and the market was also supported by active fund spreaders buying hogs and selling cattle. USDA estimated hog slaughter came in at 465,000 head yesterday, which was up from 464,000 last week and up from 444,000 a year ago at this time.

MARKET IDEAS: Overall, smaller than expected slaughter pace over the past few weeks is seen as the reason for the contra-seasonal pork strength. If the Hogs and Pigs report is correct, however, than producers are most likely holding back and feeding to a higher weight. This is a potential bearish force if slaughter picks up steam. Resistance is seen up at 68.97 and 69.77, with 67.30 and 66.92 as support.

 

Dec ’17 Lean Hogs Daily Chart