Traders Sell No Swine Before Its Time
Today’s Spotlight Market
The following are the highlights from Tuesday?s release of the USDA Quarterly Hogs and Pigs Report:
????????????????????????????????? USDA?????? Pre-report Estimate
All Hogs and Pigs:? 102%?????????????? 101.6%
Kept for Breeding:? 104%?????????????? 103.0%
Kept for Marketing: 102%?????????????? 101.5%
Fundamentals
The old saying that ?the cure for high prices is high prices? certainly describes the U.S. Hog market of late, as record high prices for Lean Hog futures earlier this year provided enough incentive for producers to aggressively expand the herd. Increased supplies of Hogs in the next several months have sent futures prices tumbling, with the February futures contract now trading near its lowest level of the year, and nearly $20 per hundredweight below the summer highs. Hog bulls received some positive news on Monday, as the Cold Storage Report showed frozen stocks at 485.8 million pounds as of the end of November, which was well below the nearly 500 million pounds analysts were expecting.
Lead month futures are trading at a nearly $3 per hundredweight discount to the CME Lean Hog Index. Some recent selling pressure might have been tied to position squaring ahead of the quarterly Hogs and Pigs Report that was released on Tuesday afternoon. The most recent Commitment of Traders report showed non-commercial traders shedding over 8,000 net long positions during the reporting period ending on December 16th on expectations that the USDA would show that the Hog herd has expanded and Hogs weights were running higher than average, which would eventually lead to increased supplies of pork in the first half of 2015.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for February Lean Hogs, we notice prices in solid bearish trend since the middle of November, with increased downward acceleration once prices broke below the 200-day moving average. The 14-day RSI has bounced back from recent lows but remains weak, with a current reading of 29.54. The market did see some buying interest once prices briefly traded below 80.000. However, any upward momentum was stymied as momentum traders sold into strength and capped the recent rally attempt. Support is seen at the recent low of 78.675, with resistance found at 82.900.
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