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Pork Futures: Hogs Soar

by 5m Editor
14 November 2007, at 9:27am

CHICAGO - Lean hogs closed sharply higher on nervous short covering and funds shifting their December long positions into February in Goldman roll fashion that out-muscled December/February forward spreaders.

Pork contracts churned at the start as traders wrestled with bearish board premiums to CME's hog index versus initial cash hog prices that came in better than people anticipated.

And although long-term sentiments favor a more bearish cash outlook because of plentiful supplies, market bulls were impressed by pork cutout's ability to remain above board in the face of substantial hog kills.

What's more, significantly higher calculated packer profit margins stirred ideas that processors may offer no worse than steady cash bids for hogs the remainder of the week. On the other hand, bears countered that packers are not compelled to pay up for hogs simply because of profitable margins.

Meanwhile, front-month hogs' rapid climb, despite subsequent midday direct hog price losses, drafted distant pork contracts that earlier lagged because of unsupportive CBOT corn futures.

Country buyers forecast flat to weaker cash hog prices for Wednesday.

Bearish hog traders forcefully argue that futures may be in for a downward adjustment Wednesday. They contend Tuesday's rally was lead by short covering without significant cash backing.

Also, those with short-market leanings also press the notion that pork cutouts and cash hog prices will take on a more ominous tone as the industry throttles down a few days prior to the Thanksgiving holiday.

Source: FXstreet.com

5m Editor