Deferred hog contracts also have come under pressure as market participants have opted to discount the entire complex. The pullback in hog futures is reminiscent of what happened in mid March.

The combination of strong cutout gains, improvements in cash hog prices and robust gains in exports provided bulls in the market with plenty of material to make their case.

But recent price movements have worked against some of the arguments that seemed to make so much sense earlier in the month.

The challenge, as usual, is to recognise short term seasonal fluctuations with shifts in supply/demand that could extend well into the winter months. Let’s look at some of these factors.

- Cutout values are not gaining ground as fast as previously expected. By early May the pork cutout had gained about 9 per cent compared to early April levels.

This was pretty robust growth and in line with what we normally see at that time of year and provided hope that pork values were on track to move even higher in June and July.

Ham primal gains were particularly impressive, gaining about 40 per cent during this period.

Combined with higher loin and butt prices the gains were enough to offset weaker pork belly prices.

The hope was that belly prices would find a bottom in early May and start to contribute to the cutout going into the summer. In the last two weeks, however, some of the trends in pork prices have failed to match earlier optimism.

Pork trimmings, which were flying high in late April and May, have made a U-turn. The price of 72CL pork last night was $62.80/cwt, down 27 per cent from where it was in early May. The price of 42CL pork trimmings also is down.

Lower trim values impact most primals since it is a credit item as specific sub-primals are harvested. Also, it has an indirect impact on the value of hams.

When pork trim prices are high (they got to almost 86 cents in early May) it sets a fairly high floor for hams because at some point the packer could just as well send the ham muscles into the grinder.

Still, much of the 10 per cent decline in the value of the ham primal we have seen recently is tied to the drop in the value of trim credits. Some of the decline in trim values is seasonal, however (see top chart). Market participants will likely pay close attention to the value of pork trimmings and the impact this has on the entire complex.

- Robust export markets remain key. There continue to be a lot of conversation about the impact that strong China demand could have on US pork exports.

China imports of fresh/frozen pork in the first three months of the year were up 90 per cent (see chart). Much of that growth, however, has gone to the EU, not the US.

Higher weekly exports to China in April and early May appeared to support a narrative of much more explosive growth going forward, helping buoy futures.

The last weekly export sales to China were lower than expected and market participants will continue to monitor this closely. Exports to Mexico also are important for the ham market.

- Lower prices for competing meats. Meat protein supplies in the US continue to increase.

Pork supplies in the fall and early winter should remain above year ago levels and for some in the market that does continue to represent a downside risk that could be significantly magnified by any export disruptions.