Weekly Purcell Agricultural Commodity Market Report Wayne D. Purcell Agricultural and Applied Economics Virginia Tech

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The entire livestock and meat complex is trying to act bullish. We had new contract highs recorded in Monday's session in the live cattle contracts, and some of the more distant lean hog contracts such as the October also recorded new life-of-contract highs.

The weighted average cash prices for carcass-based hogs are up again in early-week trade, around $54 per cwt., and that is a significant improvement that continues to happen as the industry recognizes we are not seeing any signs of expansion and bigger supplies in the distant contract months. That is behind the October lean hog recording a new high in Monday's session, and we see the active June up toward $65, within $2 per cwt. of its life-of-contract high at $66.90.

Producers will sell the June hogs on a short hedge basis, and they will also be sold by speculators on any move up toward contract highs at $66.90. This market has run from $56.50 back in March all the way up toward the $65 level without any major correction. If it is able to go up through the old chart gap left last December and challenge the highs, we will see a substantial correction from that level. Short hedges and short speculative positions are likely to be in vogue and aggressive selling will happen on any move above $66.50.