A lower open on Thursday was followed by another wave of technical fund liquidation that left hog futures sharply lower at the close. On a spot basis, the hog market traded at level not seen since November, while June hogs were at the worst price since September. The cash index was down $.66 at $63.63, and projected another $.60 for Friday.
The March Livestock Slaughter Report showed that packers killed just over 9.6 million hogs in the month of February, or 3% more than a year ago. This pushed cumulative slaughter for the year to just over 20.3 million head, or 4% more than last year. Revisions to inventory data usually occur 1-2 quarters forward, when the USDA compares their census of the hog herd against the slaughter data. The chart plots the Dec-Feb kill against the Dec 1st total hog inventory, which indicates that the USDA could have slightly underestimated the hog herd this year. The Cold Storage report showed US pork stocks were at 108% of a year ago; however, end of month February pork stocks were still below the 5 year average.
Based on selling in the last week, we estimate that funds are nearly flat, and expect that a low is confirmed ahead of next week’s inventory report.
