CME hog futures finished mixed on Tuesday in diminished volume. Traders wanted to take a pause in chasing the market following Monday’s strong rally. Summer hog futures scored new rally highs and closed slightly lower. Futures had become extremely overbought and the market needed a correction. Cash hogs have risen as packers seek supplies for an expanded slaughter rate.
USDA confirmed a slaughter of 463,000 head on Tuesday as the kill lines expand. This week the US looks to kill 2.4-2.5 Mil head which should start to pressure pork product prices in coming days. Both the US beef and pork markets should be forming short term tops in the coming days. Last week’s kill was revised up to 2.13 Mil head.
Pork cutout prices were higher on Tuesday with gains of $5.77 in bellies and $2.16 in hams. Loin prices fell $1.32 with butts off $.69. Packer kill margins are estimated at $17.10/head, which suggests that packers will remain active in seeking future hog supply.
A short term top was likely forged in futures with consolidation into the USDA January WASDE report on Friday. Hedgers should use rallies to $86-88.00 basis July futures for sales.
