A higher start to the morning in the hog market found profit taking and first correction in June since the rally began 3 weeks ago. At Tuesday’s high, June hogs were $10 over the recent low, while Wednesday marked the first lower low in the last 12 sessions in which the market has swung from deeply oversold to sharply overbought. Cash trends stayed directionaly higher, with the hog index up $1.19, while negotiated trade jumped another $2.37 at midweek.
In the pork estimates, the May WASDE slightly lowered production forecasts in all 3 of the remaining quarters, with the USDA noting lighter than expected carcass weights to date, which is expected to continue into the end of the year. However, quarterly and annual production estimates still project record production, with the 4th quarter up 5% year over year. Quarterly average prices were all raised $1 live, with the 3rd quarter at $46 live ($62 lean) and the 4th quarter at $38 live ($51 lean). The CME at today’s close is pricing in $80 for the 3rd quarter and the 4th quarter is valued at $65. Export demand appears robust, but may not be large enough to offset record production in the last half of the year. We continue to favor producers sales on rallies.
