Tuesday was a mixed session in the hog trade, with neither rallies or breaks able to get much traction. At the close, nearby contracts were just below unchanged and deferred contracts were slightly better. The hog index was down $.28 for Tuesday and projected 4 cents lower for Wednesday.
The pork cutout was higher Tuesday morning, but down $.20 in the afternoon pork report at $103.99. The chart plots the spread between the cutout and the hog index, which this week has so far averaged $11.45/cwt or nearly $24/head. Note that margins tend to improve into the end of the year as packers gain leverage on increasing hog numbers.
The market is still struggling to balance strong pork demand and far better than expected cash hog prices, against record supplies and upcoming seasonal trends. Basis against August is holding at a record, which is offering temporary support. Though bearish seasonal trends and supplies look to cap late summer rallies.