The product market has turned and the live hog prices are following them.
Below is how the weekly product market changed for the week ending 7/28.
*Product Price on Monday 7/24 Price as of Friday 7/28 Change
Loin 90.52 85.97 (4.53)
Butt 92.46 87.41 (5.05)
Picnic 66.13 65.18 (.95)
Rib 111.41 107.72 (3.69) Ham 78.59 74.11 (4.48)
Belly 215.68 212.58 (3.10)
Carcass Cutout 102.21 98.75 (3.46)
*National Carcass $82.39 $80.98 (1.41)
*National Live Price 67.14 $65.16 (1.98)
**Estimated USDA Hog Slaughter Week ending 7/29/17 2239
Actual USDA Hog Slaughter Same Period Last year 2192
% change year over year +2.1%
As you can see, the carcass value lost -1.41 cwt. while the live price lost -1.98 cwt.
Live Hog Contract Friday Close Net Change August Hogs 81.40 (.85)
October Hogs 66.50 (1.17)
December Hogs 61.05 (.75)
Looking into next week:
- The product market will be on the defensive from here forward, for at least the next week to ten days.
- Swine Times has been cautioning the readers to pay particular attention to the bellies.
- They have yet to correct, but when they do, they could lose $55 to $65 cwt. before finding any interest by the processors or the freezer. This move could take $9 to $10 cwt. out of the cutout. This would turn the cutout from positive to negative with all the other prices staying steady. Should this occur, the packers will take a totally different posture when buying hogs. They will not chase live prices at higher money just to fill their kills and have to discount the product in the process.
- Hams will not be an offset even though export interest in them is fairly brisk. We will be looking for them to move down another $2 to $3 cwt.
- The retail cuts will continue to struggle as larger kills will put downward pressure on their prices. Beef appears to be getting priced into August features at the expense of the pork cuts, not to mention cheaper broiler prices.
How do we trade this?
- August hogs are not out of line, basis wise. Look for rallies to exit or to unwind LHQ/LHV spreads. Don’t paint yourself into a corner as you are running against the calendar. The August hogs expire on August 14.
- The deferred hog futures can be a little tricky to trade from here. They are at a substantial discount and any rebound in product values could potentially cause the shorts to want to cover. Stay vigilant and agile in regard to reports of increasing pork retail prices and or export interest. Be prepared to exit positions or put on spread positions, as the news of product or export business unfolds.
- Sell October hogs on rallies, but be patient. Let the funds run the price of them up, and then scale in and sell them as they go higher.
- If you are bear spread, long the December hogs and short the October hogs, you may want to consider either lightening up on these or exiting them altogether if the spread moves down to around $5.00 cwt. It closed out Friday at about $5.50.
- The July month end is Monday the 31’st, and the market could be extremely volatile. Watch your positions closely.
*USDA National Hog and Pork summary
** Expressed in thousand head
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