LEAN HOGS Good morning! Lean hog futures opened lower and closed lower yesterday with the market unable to penetrate the Wed session highs (recent highs). The selling emerged despite continued “solid” fundamental news including strong cash and higher cutout. The fact that total OI was higher on the lower performance indicates that commercial and hedge type traders are “willing sellers” at this time and price. OI was up just over 1,000 cars, and record large at 248,000. While the weekly slaughter is going to come in below last week (indicating fewer numbers on a seasonal basis) the kill will still be substantially above last year. Keep in mind the hog & pig indicated we’ll see numbers consistently running from up 7% to up 8%. The key question is; can demand remain good enough, hot enough, to keep the market in an uptrend given a consistently large supply of butchers? Ladle on top of that the idea that corn will remain expensive and sow slaughter will thus remain in liquidation mode and add to the overall pork tonnage. Sow slaughter last week was up 19% from last year. My answer to the above question is…unlikely. My hedgers are selling the board (summer contracts) while my spec trade is looking to sell further strength in the June hogs while holding length in the Feb. My opening call is higher boosted by the higher pork cutout value.
