Price action: The hog and pork complex is sustaining its summer rally, with nearby August futures adding another $1.55 to $101.65 Tuesday.
Fundamental analysis: Strong consumer demand is seemingly continuing to push the hog and pork markets higher. That is, last week’s approximate 1% annual increase in hog slaughter marked four of the past five weeks of year-to-year slaughter increases, implying current supplies aren’t quite as tight as anticipated. And yet cash and wholesale prices continue climbing. As expected, the CME confirmed last Friday’s quote for the hog index at $104.60, up 56 cents from Thursday. Today’s preliminary calculation puts Monday’s figure at $105.26, up another 70 cents, which contradicted ideas the ongoing cash rally might start slowing.
Consumer demand strength, belatedly spurred by grocers finally cutting retail pork prices in June, apparently remains robust. Pork cutout added another 37 cents at midsession today, reaching $117.58. That represents its highest level since late August last year. We still think rampant bacon demand amid peak BLT season and price cuts in the meat case is playing a major role in the ongoing advance and don’t see it ending quickly. One might argue wholesale bacon prices are overextended and ready to reverse. But current cut prices are around $229, with primal value at $223.21 at midsession, which are well below peak 2021 and 2022 cut prices (weekly averages) near $257.70 and $244.50, respectively. We still think the rally could easily last into next week. Gains become more problematic beyond that point due to the onset of the second-half slaughter surge in mid-August.
Technical analysis: Bulls clearly still own the technical advantage in August hog futures at this point, especially with today’s close coming near the daily high and marking a new high close for the move. Today’s high places initial resistance at $101.975, with likely backing from the July contract’s late closing high at $102.50, then its July 6 high of $103.70 and later at the psychological $105.00 level. Initial support is marked by today’s low of $101.98, with strong backing from Monday’s low of $99.95, which virtually coincides with the psychological $100 level. A drop below that area would have bears targeting the 10-day moving average near $98.02, then the psychological $95.00 level.
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