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CME Hogs May Open Weak on Liquidation and Low Cash Prices

Strategic Insights

— 2 min read

Chicago Mercantile Exchange (CME) hogs are likely to open weak on Wednesday on possible follow-through liquidation and steady-to-lower cash hog price expectations, according to analysts and brokers. The U.S. Department of Agriculture's Iowa/Southern Minnesota weekly average hog weight showed hog weights in the region for last week at 266.8 pounds, compared with 266.3 the previous week and 257.5 a year ago. This could lead to a struggle for the pork cutout due to increased hog weights versus a year ago and daily hog kills back over 400,000 head.

Key Takeaways:

  • Possible follow-through liquidation and steady-to-lower cash hog price expectations are leading to a weak opening for CME hogs on Wednesday.
  • The U.S. Department of Agriculture's Iowa/Southern Minnesota weekly average hog weight showed a 2.5-pound increase from the previous week to 266.8 pounds, up from 257.5 pounds a year ago.
  • Increased hog weights versus a year ago and daily hog kills back over 400,000 head are contributing to the struggle for the pork cutout.
  • Late-Tuesday's $0.23 per hundredweight pork cutout increase and potential short covering could become positive market factors.
  • Spot-August and nearby-October oversold Relative Strength Index conditions may attract prospective bulls.
  • Bullish speculators may be drawn to August through February discounts to CME's hog index.
  • Pork packer profit margins are stirring confidence among bullish traders that packers may ease cash pressure if pork cutouts show consistent improvement.
  • The Dow Jones packer margin index for Friday's operations was plus $10.44, compared with plus $8.38 the previous day.

Statistics:

  • Hog weights in Iowa/Southern Minnesota for last week totaled 266.8 pounds, a 2.5-pound increase from the previous week.
  • Daily hog kills are back over 400,000 head, contributing to the struggle for the pork cutout.
  • The pork cutout increased by $0.23 per hundredweight late Tuesday.
  • The Dow Jones packer margin index for Friday's operations was plus $10.44, a $2.06 increase from the previous day.
  • CME bellies opened mixed, with possible short covering and potential bullish response to Tuesday evening's CME weekly belly storage report.

Sources:

  • Chicago Mercantile Exchange (CME)
  • U.S. Department of Agriculture's Iowa/Southern Minnesota weekly average hog weight report
  • Dow Jones Commodities News via Comtex
  • SmarTrend Alert, an automated pattern recognition system, indicated an UPTREND on 12-09-2008 for CME @ $227.04
  • Comtex News Network, Inc.
  • Dow Jones Newswires

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