It is possible futures were buoyed earlier in the day by a USDA cutout print that was $1 higher than the day prior. Pork belly pries in the morning sheet was printed $10 above the previous close, an impressive turnaround considering the downward trend during the last few weeks.

The issue, however, is that USDA indicated the volume was light enough, and likely from one single source, that they simply could not show the detail due to confidentiality. When the afternoon pork report came out on Friday, the situation had completely reversed.

There was a decent volume of pork bellies traded at levels under Thursday, with the pork belly cutout now approaching $100/cwt. Other pork primals were down as well. The ham primal is of particular importance because it has been one of the few primals that has held together relatively well.

Going into the fall, it is particularly important for packers to be able to put enough money on hams in order to carry the cutout. The challenge will be in doing that while at the same time processing +2.5 million hogs.

Last year the ham primal came under significant pressure once slaughter hit those levels, packers needed to lower the price enough in order to generate salves volume both in domestic and, importantly, in export markets.

The recent decline in the value of the pork cutout could be problematic for packers going into the fall. For hog producers, both cutout values and the increase in processing capacity remain critical.

While two new plants are going to be available this year, adding as much as 22,000 head of daily capacity, they are still taking their first steps and it will take some time before they start operating anywhere close to those levels.

How much time? It is going to be an important consideration for producers that are counting on those plants for the next couple of months. And we have yet to see any signs that producers are changing their stance on the number of sows they need on hand.

Sow slaughter in the last six weeks has been fairly close year ago levels. Keep in mind, however, that on 1 June 2017 there were 6.069 million breeding animals on hand compared to 5.979 million the year before (+1.4 per cent).

We don’t have any idea how many gilts producers are holding together but judging from the trend in sow slaughter, it does not appear that producers are trying very hard to pull in the rains on hog supply expansion.