LEAN HOGS Good morning! Cash hog prices are called firm to higher today. The focus of the trade is the winter storm moving across the Midwest making transportation difficult for moving animals to slaughter. It appears the trade is “solely focused” on the short term. Hog futures rallied Monday and remain firm to higher today in the early electronic action. Hog open interest was up only 204 cars on the strength yesterday. Feb hogs hold a large premium to cash. This contract goes off Friday. Thus, it’s fair to say the board has already factored in cash strength for Tuesday/Wed. The USDA, in their supply/demand report this morning lowered projected pork production for this year by 115 million lbs. They also left export projections unchanged at 4.5 billion lbs of pork, up 8% from last year’s exports and 20% of total production. These are impressive export numbers and will be the key to the hog market moving forward. I fear that problems in the poultry industry could cause the pork exports to cool a bit from these projections. The USDA is projecting that poultry exports will drop nearly 1.0 billion lbs from last year. This will change the poultry tonnage available to U.S. consumers and effectively compete with pork for the consumer dollar. If the downtrend is going to resume in hogs futures I would expect it to peak today. I’m trading the April from the short side for my spec traders.
