Hog futures opened the week lower, but were mostly higher at the close as strong demand developed on deeply oversold technical conditions and the April contract’s current discount to the cash hog index. The index started the week down $.25 at $75.38, and the weekend slaughter data projects another $.66 lower for Tuesday. February hogs were $2 under the index at Monday’s close, while trading ends on Wednesday.
Packers reported on Monday that they had just over 2 million head scheduled to be delivered this week. Based on Monday’s schedule, we look for a weekly slaughter total around 2.4 million head, which is in line with recent weekly averages but still 3% larger than the same week last year.
After dropping $35 last week, the belly valued gained close to $9 on Monday and the cutout value increased by $2.27 to $79.71. Estimated slaughter margins at the start of this week are at $3/head versus $20 last year. With record large supplies we expect a break in the cash market will develop.
