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

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August hogs recorded a current year low at $56.05 on Friday and that contract came into this week on a much stronger note.

This market is oversold and will continue to get some help from the bullish beef sector as daily slaughter levels start a slow seasonal climb from this point forward. Weighted average prices for hogs on a carcass basis are slipping down toward $56, not a huge break from mid July levels but lower still.

I do not expect to see the recent lows in the futures taken out before we see a rally. Look for a 38% correction of the recent long decline on the October lean hogs from $59.40 to $50.75 which carries this contract back up to $54.04.

I would look at short hedging opportunities on a rally back toward $54 by the October. We have a decent chance of seeing those levels when the beef market resumes surging to higher prices after it makes a correction to the downside to allow the profit taking and the relief of the overbought conditions in that market.