August hogs closed higher for the first time this week on Thursday, closing up to 1.625 to 70.300, off its highs of the day at 71.050. The market fell from Monday’s high of 75.850 down 7.325 to this week’s current low of 68.525 which was hit on Wednesday. The hog market is searching for support as it tries to price in a surplus of product and a loss of US exports. Uncertainty in tariffs and trade war fears continue to be the driving force as in so many other markets right now. The hog market was already forecasting an increase in production for the second half of the year and now there is a possibility of a decrease in exports to Mexico and China, who combine for 40% of US exports annually. The USDA estimate for hog slaughter was up from both last week and this same time last year. August hogs traded to a 13-cent discount to the cash market this week, down from the normal 4.5 cent discount. The large discount to the cash market and some short covering explains yesterdays bounce, although falling from the highs does not give confidence to the bulls. The selloff this week has lowered momentum studies to oversold levels which could also provide some support. If the move lower continues look for trade down to Wednesday’s low of 68.525, with some support coming in at 69.50. Resistance comes in at 71.30 and 72.50 with a close over Thursday’s high needed to reverse the trend back to the upside.
Lean Hogs Aug ’18 Daily Chart