Pork Futures: Hogs Plunge From New Monthly Highs

by 5m Editor
27 July 2007, at 8:38am

CHICAGO - Chicago Mercantile Exchange hogs closed lower Thursday on fund liquidation, profit taking and sell stops that reversed an early-session sprint to new contract highs spurred by technical buying and short covering.Pork bellies also finished lower.

Meanwhile, live cattle settled mixed and feeders firm on the day.

Lean hogs sagged at the start, pressured by Wednesday's huge pork cut out discount, shrunken calculated packer profit margins and lower cash hog prices. August's bearish premium to CME's hog index and October's overbought Relative Strength Index condition further weighed on front-month hogs.

However, futures slowly rose amid short covering that intensified rumors that China might be in the market for US pork, something that has been swirling in the pit the past two weeks.

Panic buying set in when funds flexed their muscle after spot-August rolled through key moving average technical resistance barriers and October moved closer to scoring a new contract high. Front-months' climb also pulled up distant hog months that received added support from higher CBOT corn futures.

Nevertheless, hog futures retreated amid later suspicions that China'spotential US pork purchases might not be of the quantity or quality that some bullish traders may be expecting. That triggered massive selling by funds and profit taking by longs. Yoked by bearish fundamentals, commercial traders watched the proceedings from the sidelines.

Country hog buyers foresee cash weakness for Friday as processors struggle to get a grip on elusive estimated profit returns. What's more, it is believed that packer margins may continue to suffer due to irksome daily hog kill rates and slumping wholesale pork demand.


5m Editor