Lean Hogs rallied today as African swine fever fears spread through the market. A major Chinese feed company Tangrenshen Group said one of its subsidiaries’ feed tested positive for the disease. This increases concern that China has been unable to control the disease and its spread throughout the country. There have been over 50 cases of the disease found in China and it has been found in most of China’s pig farming regions. The discovery of the disease in feed has confirmed many industry experts’ fears and creates apprehension over purchasing feed from Tangrenshen and its subsidiaries. The contamination is difficult to control in feed and worries are increasing on how to verify the safety of the food farmers will feed to their pigs. With the country producing over 700 million pigs a year, the continuing spread of the disease is worrisome. There is no cure for the disease and can last for weeks in feed supplies. The deferred contracts remain strong as traders expect China to be forced to increase imports as the disease continues to spread. The December contract rallied strongly early in the session but ran into resistance at the 100 DMA. It reached a high a 57.90 which is just above the 100 DMA at 57.425 and settled below it at 56.55. The December contract needs a close above the 100 DMA to change the pattern. It has been failing at the 100 DMA since peaking at 60.20. A close above the 100 DMA could see the high retested. A failure from settlement could see support tested at 55.475 and then 53.80. There are constant worries about short-term burdensome supply making it difficult for December to hold onto rallies. The strength of the deferred contracts and the discount to the Lean Hog Index could limit the downside of the December contract.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Friday, November 16th 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.