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The market seems to have the supply fundamentals to push higher but it may take a better demand outlook to turn the trend back up. Too much poultry production is a growing problem for pork values and weakness in pork values this past week during a period of lower supply should be a concern for the bulls. The slower than expected marketings of hogs due to weather has some traders nervous that marketings could pick-up soon and weights could tick higher but this has not been the cash so far. Production has been lower than expected and weights have also been down and this has brought about talk that lower quality corn has slowed weight gains. April hogs pushed lower on the session yesterday as the early weather-related rally failed to attract new buying interest. Weather helped support lower marketings and higher cash markets but traders see lower cash markets next week when the weather clears. Talk that Russia and US officials are at least looking at proposals helped to provide some support early but there is also talk that the Russians are already arranging different sources for poultry. Strength in outside markets failed to provide much support but the market did manage to close well off of the lows. The CME Lean Hog Index as of February 9 came in at 66.62, up 43 cents from the previous session and up from 66.60 the week before. This leaves April hogs at a slight premium to the cash market. The estimated hog slaughter came in at 417,000 head yesterday. This brings the total for the week so far to 1.658 million head, down from 1.678 million last week at this time and down from 1.689 million a year ago. Pork cut out values, released after the close yesterday, came in at $68.31, down 40 cents from Wednesday and down from $69.15 the previous week and pork values are at the lowest level since February 3rd. Actual US pork production for the week ending January 30th came in at 433.9 million pounds, down from 443.6 the previous week and down -5.5% from a year ago. The previous three full weeks in January saw production down 2.8%, 6.3% and 12.9% lower than last year so production has been coming in below expectations for the past month. For the week ending February 6th, the USDA original estimate is down 3.2%. The market found some support this week from news that the US Poultry and Eggs Export Council has put foreword a proposal to resolve the dispute with Russia. US representatives will now present their proposals to Russia as soon as meetings are set up. Cash looks steady today. Sow slaughter for the week ending January 30th reached 57,784 head, down 11.1% from last year.
TODAY’S GUIDANCE: April hog resistance is at 67.97 and 68.97 with 67.17 and then 66.15 as support. A move through support could spark a resumption of the downtrend with 64.07 as downside objective.
TODAY’S MARKET IDEAS: Look for choppy to lower trade ahead.
