Lean Hog Futures Expected to Open Flat to Lower on Cash Prices and Near-Term Supplies

Strategic Insights -

Leaning hog futures for Monday are expected to open flat to lower due to concerns about large near-term slaughter-ready supplies and declines in cash hog prices. Despite the market's oversold condition, some possible support could come from the recent declines in wholesale pork prices. Market analysts and traders are awaiting outside direction before making a move, with a mixed opening expected in live cattle and feeder cattle futures. Recent beef demand has been strong, with beef production up 2.8% from a year ago, and a higher cash price this week could be a hard sell if beef prices do not see a corresponding increase.

Key Takeaways:

  • Lean hog futures are expected to open flat to lower due to concerns about near-term supplies and cash prices.
  • The market's oversold condition may provide some support for prices, with the nine-day relative strength index in most-active December below the 30% threshold.
  • Wholesale pork prices declined by 18 cents per hundredweight on Friday, but the small drop in prices may be viewed as neutral to supportive for futures.
  • Live cattle and feeder cattle futures are expected to open mixed, awaiting outside direction before making a move.
  • Cash trading last week was stronger than expected, with futures trading taking CME contract prices higher.
  • Market analysts are wondering if the futures trading has become overexuberant and taken prices higher than they should be.
  • Strong beef demand could be behind the strong showing in last week's cash market, with beef production up 2.8% from a year ago.
  • Higher cash prices this week may be a hard sell if beef prices do not see a corresponding increase.

Statistics:

  • The December hog contract fell 4.95 cents, or 6.7%, and hit a 6 1/2-month low on Friday.
  • Last week's slaughter was at 2.263 million head, the largest in 10 months.
  • Wholesale pork prices declined by 18 cents per hundredweight on Friday.
  • Beef production was up 2.8% from a year ago, even while cattle prices are up $14, or about 17%, from a year ago.
  • Feeder cattle futures are expected to open mixed, although lower corn prices could bring in more investment buying.

Sources:

  • Dow Jones Commodities News via Comtex
  • Dow Jones Newswires
  • Comtex SmarTrend Alert
  • Comtex News Network, Inc.