Hog Receipts Appeared to Be Very Light Yesterday

by Archer Financial Services | Aug 01, 2017
By Dennis Smith 
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Cash hog prices were lower yesterday but we noticed that receipts in the western hog belt came in extremely light. For example, the USDA reported only 433 negotiated pigs in IA/S. Minn compared to 4,187 last Monday. Is this really possible or will there be a revision? Regardless, the weekly kill is projected to increase about 16,000 pigs compared to last week (2.255 vs 2.239) and my sources are suggesting this will be more than enough pork to satisfy late summer demand. So the attitude is for a lower cutout this week and tempered cash bids. Most of the bearish trade is predicated by a sharp fall in bellies which I’m not convinced will happen. So far it has not. Yesterday’s kill was below estimates most likely due to a Saturday morning fire at a JBS/Swift plant. We don’t have a major ax to grind with futures. We’re loaded with inexpensive Aug hog calls and taking these into expiration. Our hedgers are short Oct and Dec. However, with Coldwater coming on-line in early Sep, the fall cash hog market may perform much better than expected. With the dollar on the lows for the entire year and with pork prices edging lower, we see no reason for exports to drop off. Exports have been outstanding so far for U.S. pork.  



LC posted new low closes for the current move on Monday with Aug closing below the June hogs which I consider a bearish technical signal. Weakness in the spreads was negative and a poor performance in the most active Oct is also sending bearish signals. A close well below 11200 in the Oct will signal another leg down. If this occurs, my downside target will be 10800. The weekly cattle slaughter is projected to be huge this week at 633,000 which compares to 627,000 last week. The product is expected to remain under pressure with beef production overwhelming late summer demand. Bullish traders are exiting the market with yesterday’s decline in OI by just over 5,700 cars. Feeders appear poised to challenge key support which I’ll define as 14200 in the Aug. We are short and prepared for a break in both markets should that occur. 

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