Hogs were under pressure on Thursday, but were able to close mixed with funds offering support late in the day. February hog futures closed at $70.22, up $.475 as futures caught support against the old highs at $69.00. A drop below $69.00 basis February would signify a deeper correction of the recent rally. ARC Research continues to point that hogs have scored a seasonal top in their rally to $73.00 basis February futures.
The US pork cutout rose $.65/cwt on a carcass basis to with bellies rising another $3.59/cwt to $121.96. The belly market continues to rise on rumored strong demand from retailers. Bellies are now up more than 30% from their September lows. The rise in belly prices is allowing packer kill margins to rise to $39.56/head, which will keep packers active in seeking hogs prior to the US Thanksgiving Day holiday.
The November WASDE Report indicated that US barrows/gilts would average $45-47.00 on a lean basis for the 1st quarter and $47-51.00 in the 2nd quarter. The annual 2018 estimate for price is $43-47.00, some $2-6.00/cwt below the 2017 forecast.
Note that WASDE forecast that the US would produce 26,925 Mil pounds of pork in 2018, up 1,180 Mil pounds or 4.6%. Such production would be record large and maintain a supply bearish price trend. Compared to October, total US red meat production rose 393 Mil pounds to a record large 54,763 Mil pounds. The US export pace will have to grow to make sure that these record large supplies are red meats are utilized.
