Why would hogs Move Higher?
If they did, here is a spread to take advantage. Buy April19/Sell July 19. Maybe the best explanation is that its end of month profit taking combined with new rolls in the market first half of March, that could promote some short covering.
Reasons for Rally?
Lower slaughter numbers due to weather disruptions have slowed the pace. Despite production coming in well above trade expectations (up over 5 percent next week), expectations were 2 percent a week, but its been 5 to 7 percent higher per week since early January.
We haven’t seen cash prices this low since Nov 2009 according to Hightower. A close under 23 cents, and I would be out (see chart).
Summation
In short, I think there were many speculators who got long back in October/November off the African Swine Flu news. Then most likely these longs out the first time up near the late 2018 highs taking profits.
Then bought back when the hog market spiked higher (end of January) hit between 62/ 64 cents on the Board and have been liquidated or stopped out on this late massive February break.
Stronger demand news may enter into the market at anytime and is anyone’s guess as it relates to Chinese purchases off of a trade deal. We think if hogs hold in here, that April will tighten vs July going forward. The last three years has seen hog futures rally from late winter into early Spring and beyond. Will this be a fourth?
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