October hogs closed sharply lower on the session yesterday, and down to the lowest close since July 6th. A lack of carryover support from the recovery rally in the stock market and other commodity markets may have encouraged some long liquidation selling that took prices down to the early June lows. There are some traders that have continuing expectation for a seasonal decline in cash markets into the fall. Cash is expected to trade steady today, but other traders see increasing weights ahead with cooler Midwest weather boosting production. A surge in pork values up to new record highs this week leaves packer profit margins in the black but a huge discount of futures to the cash market might limit the downside. Cash hogs traded steady yesterday, pork cut-out values posted another all-time high again Monday night and the CME 2-day Lean Hog Index was at 107.23 compared with October futures as low as 88.55. Pork cutout values released after the close yesterday came in at $109.53, down 66 cents from Monday but up from $106.23 during the previous week. The estimated hog slaughter came in at 407,000 head yesterday. This brings the total for the week so far to 803,000 head, up from 748,000 head last week at this time but down from 806,000 head a year ago.
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