HOGS: Key Reversal and Seasonal Decline in Production
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June hogs closed higher on the session yesterday after posting a new contract low. The higher close represents a key reversal and it was an outside day up. The market is probing for a short-term low as traders see a short-term uptrend in prices, and a seasonal decline in production as positive forces. However, June remains at a significant premium to the cash market. The CME Lean Hog Index as of May 5 was 74.42, up from 74.53 the previous session and 72.10 the previous week. The USDA pork cutout, released after the close yesterday, came in at $81.01, up 85 cents from Monday but down from $81.05 the previous week.
The USDA estimated hog slaughter came in at 451,000 head yesterday. This brings the total for the week so far to 919,000 head, unchanged from last week at but down from 937,000 a year ago. With hog prices under the cost of production, and elevated hog prices in Europe, and China demand for imports continuing, the export market remains a positive with year to date US pork exports up 7% from last year’s pace.
Today’s Market Ideas
Keep in mind; US March pork exports came in at 608.12 million pounds, up 11.8% from a year ago. This was the highest monthly exports since May of 2021. The key reversal for June hogs is a bullish technical development, but the premium to the cash market is a limiting force. June hog close-in support is at 83.30, with 86.27 and 87.35 as resistance.
