Hog futures were higher at the open and extended their gains through Wednesday. October continued to lead the way higher into this week’s expiration and gained another $1. The CME’s lean hog index gained $.69 at midweek and is projected to jump $1.22 on Thursday.
The pork cutout value found support just above last year’s seasonal low, and has held in a narrow range over the last 3 weeks. In 2015, the market did not bottom until late December, while the seasonal low in the pork carcass was traded in early 2016 last year. While supplies and weekly production totals have been massive in recent weeks, estimated slaughter margins have also been exceptionally strong and packers have surprisingly been bidding for extra loads.
While the supply fundamentals are exceptionally bearish on record inventory, both demand for pork and packer demand for hogs has been surprisingly strong through the early days of the quarter. We caution against turning bullish, but the recent strength in both cash and futures prices could be suggesting an early seasonal low.
