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

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December lean hogs closed Monday at $52.65, and that is still well above the weighted average price of $45.55 in Monday afternoon direct hog prices.

Slaughter levels are seasonally high, and over time, the daily slaughter rate is usually highest in November. This year is not an exception, it appears, and the market is under pressure.

The December hogs had run up toward the $61 level and recorded a new high just a few weeks back. Much of that was coming with the record high prices in the cattle markets, and the supply-demand fundamentals did not support a $60 lean hog market.

Hold short hedges here until we test either the $51 low from last week or, if you are more conservative in your selective hedge trading, make the market test the August low near $50 and hold there before buying back short hedges.

Processors should join in the buying on a dip toward $50 to place long hedges for December and into early 2004. Keep in mind that as long as the cash market is well below the December contract, it will be very difficult for the futures market to sustain any rally.