Deferred futures, on the other hand, did not have as much support. April and June contracts declined modestly from the previous day’s close.

Packers have been paying more for hogs recently as demand in export markets appears to be in relatively good shape and ham values have been gaining ground. The authors have pointed out in the past, and it bears repeating, that hams remain key for the overall cut-out at this point in the year.

Much of the decline in cut-out prices in late August and early September was due to a ‘double whammy’ in belly and loin prices. Seasonally that was not a surprise although the timing was a little earlier than normal. Belly values collapsed from around $160/cwt in early August to less than $110 during the first part of September.

The decline in pork belly values accounted for more than half of the drop in the value of the cut-out. Loin prices also tend to weaken once Labour Day purchases are done and this was the case this year.

Both of those factors are now in the market and the question remains what happens with other parts of the carcass. Will hams continue to gain ground going into the holidays?

The latest Cold Storage report indicated that ham stocks are higher than a year ago but far from burdensome. The authors estimate ham cold storage stocks at the end of August at around 148.2 million pounds, about four per cent higher than a year go and seven per cent higher than the five-year average.

For much of spring and summer months, end users were looking at very high implied ham prices for the fall and limited hedging opportunities. Some opted to use their freezers to hedge their fall needs but that option has its own costs.

The price of competing products, especially turkeys, remains high and supplies are tight. This should help ham demand. Another supporting factor for producers has been the trim market. Prices for lean and fat pork trim were sharply higher in August, in part because of the decline in hog weights.

As the first chart shows, hog weights are now back to where they were a year ago. While weights have increased recently, it is hard to argue that they indicate hogs are backing up. Rather, they reflect the normal seasonal increase that comes with cooler weather.

Pork trim values have pulled back from the extraordinarily high levels seen in August but they remain significantly higher than a year ago. So far, trim demand also appear to be quite strong.

Finally, one should also keep an eye on drop credits. The latest reported data pegged the hog drop credit at $5.49 per cwt (live weight basis), 21.5 per cent higher than the comparable week a year ago.