A continued drop in the cash and pork markets this week plus a stiff premium of futures to cash plus a negative tilt to outside markets are all factors which could spark some long liquidation selling early today. However, the outlook for a declining production base into the first quarter has traders watching for a seasonal low any day now and cold storage supplies do not look to be a burden. For the monthly cold storage report released after the close, end of October frozen pork stocks came in at 490.7 million pounds as compared with 491.9 million the previous month and 481.6 million last year.
Traders were looking for stocks near 505 million. Stocks were up less than 1% for the month and typically stocks increase by about 4% for the month of October so the news is considered supportive. China imports in September hit a record high and traders believe that imports were active again in October to help explain the smaller cold storage supply. February hogs closed slightly higher on the session and moved to the highest level since October 25th. The markets traded lower early but managed to bounce to trade slightly higher into the mid-session. Talk of the premium of futures to the cash market helped to limit the buying and held December lower on the day to close 20 lower.
Cash markets at terminals were mostly steady and weakness in pork product markets late yesterday helped to limit the buying as well. Iowa/Minnesota direct hogs traded 57 cents higher to 81.26. The CME Lean Hog Index as of November 18th came in at 83.38, down 51 cents from the previous session and down from 86.29 the week before. The estimated hog slaughter came in at 431,000 head yesterday. This brings the total for the week so far to 863,000 head, up from 862,000 last week at this time and up from 862,000 a year ago. Pork cutout values, released after the close yesterday, came in at $89.04, down 87 cents from Monday but up from $88.67 the previous week.