The February Lean Hogs contract is now the lead contract as its volume has overtaken the December Hogs. It made a new high early in the trading session reaching 69.50 before breaking down hard and making the session low at 66.875. The market had been rallying on speculation the Chinese will eventually have to purchase US Hogs because of the losses it is suffering to its hog population. This is due to the African swine fever which has spread through the hog producing regions of the country. Finding it in the county’s largest producing region and in wild boar signaled to traders that China won’t be able to control the spread of the disease. If China loses 16% of hogs analysts are guessing the major exporters will have to double their exports to make up for China’s losses. That would cause major disruptions in the producing countries as they try to accommodate China, potentially driving prices higher as demand surges. Today saw Hogs pull back hard as the present situation slowed down future considerations. With slaughter at record levels there is a huge supply of pork, which is putting pressure on cutouts and cash prices for hogs. The Pork Cutout Index declined to 69.13 and the Lean Hog Index has fallen to 58.51 as of 11/16. The futures snap back was probably a reaction to these continued declines. If futures trade below 66.55, a test of support at 64.80 is possible. If the market returns to its focus on the African swine fever a re-test of the high is possible.
Cattle markets were stagnant as traders wait for the release of the Cattle on Feed report which comes out during the trading session on Wednesday. Analyst estimates for the report are on feed at 104.3% of last year, placements at 99.1% of last year and marketings at 104.2% of last year.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Friday, November 29th at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.* *
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
888.391.7894
Fax: 312.256.0109,
www.walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.