Selling in the hog market developed right from the open on Friday and kept futures under pressure into the close, with August marking the largest decline. The hog index was up $.09 at $92.84 and projected 6 cents lower for Monday – only the 2nd lower day since late April, while negotiated trade was off $.40 on good volume.
The Commitment of Traders report showed that funds used the break late last week and early this week to add to their hog position, taking net length to 84,189 contracts or the great PEDs scare in 2013! Hedgers were light sellers on the decline, but now have the most pork hedged since last summer.
The cutout gained $.81 on Friday, but the belly value was down $.09 marking the first lower weekly close since April. The hog rally has been largely driven by the cash pork belly market over the last 10 weeks, so a top in bellies is most likely signaling a top in the cash hog market. We are bearish on rallies.
