Few CME traders could have been terribly surprised that the big Monday cattle rally spilled over into the hog pit, with the swine contracts posting varying gains. A portion of that strength may also have reflected bullish expectations concerning the short-term hog outlook, since cash prices traditionally rise moderately during late January and early February. The fact that the CME lean hog index remains at a noticeable premium to the nearby February future also seems very supportive. The afternoon cash reports were decidedly mixed, with those in the influential Iowa-Southern Minnesota region posting significant losses. Pork cutout rose modestly. We suspect disappointment with the results of the Monday afternoon cash and wholesale reports undercut hog futures Monday night and Tuesday morning. February hogs slipped 0.32 cents to 86.85 cents/pound in early-morning electronic trading, while June futures skidded 0.15 cents to 97.50.
A Monday afternoon wire service report indicated that Chinese officials proved able to sell only 29% of the government cotton put up for sale last week, which made the previous weekly result, at just 55% sold, seem positively robust. This reportedly encouraged ICE cotton traders, since it suggested demand from Chinese textile mills will remain strong and that the government will have a hard time getting rid of its massive stockpile. Many in the industry view cotton as being significantly overvalued when viewed within the context of huge Chinese inventories, but traders seemingly harbor few worries in this regard. The strong overnight advance offers more proof on that point. March cotton futures jumped 1.17 to 82.22 cents/pound in pre-dawn trading, while December surged 0.99 cents to 80.98.