Pork Futures: Hogs Soar

CHICAGO - Chicago Mercantile Exchange lean hogs finished up sharply Tuesday on short covering and speculation that Smithfield Foods (SFD) inked a deal to supply pork to China that the company later denied.
calendar icon 21 November 2007
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Pork bellies also finished up sharply and live and feeder cattle contracts settled higher.

Short covering and Monday's moderate pork cutout rebound caused lean hogs to gap higher at the start. December and February's mildly oversold Relative Strength Index conditions furthered advances that were an extension of Monday's late day rise from session lows.

And, despite bearish cash results, futures skyrocketed, fueled by talk that Smithfield Foods agreed to sell pork to China that was ultimately dismissed by the company.

Nonetheless, the rally persisted amid mounting speculation that several packers would kill Sundays to absorb massive production during the upcoming winter holidays. So far, only one processing plant plans to operate on Sunday.

Floor traders foresee weaker bids for hogs going into Wednesday as producers clear out animals before Thursday's holiday. Also, packers are thought to have numbers on their side, and a few others may be out of the market into the middle of next week after booking hogs ahead.

Pork cutouts were up Monday, but the consensus is that could change as fresh-meat buyers book product on an as-needed basis because of the holiday. And, given the state of current pork production, retailers may shy away from purchasing product at current price levels.

Source: FXstreet.com
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