Welcome to edition #1 of what we hope will be the first of a long line of the newest newsletter to come from Daniels Trading and Daniels Ag Marketing. It’s called The Swine Times, and it will be dedicated to helping folks speculate and form fundamental opinions in the Lean Hog markets. By July we will have the infrastructure set up for a weekly newsletter containing comments and trade recommendations to be emailed out directly to you the client. For now, we will publish the newsletter and recommendations on the DT blog so you can get to know the product better while we build a following. Thank you for reading! We will try to publish on Monday, and anytime we recommend a position.
The Swine Times will be written with fundamentals in mind and from an insider perspective. Daniels Ag Marketing employs brokers with extensive industry history and knowledge that will help generate ideas on how to position yourself profitably in the Lean Hog market. The newsletter will focus on both outright trading and spread trading within the term structure. We hope this provides you, the DT client, our perspective into how one can trade these Lean Hog markets from a fundamental perspective.
Thanks for reading!
Now that we have the Memorial Day holiday behind us it appears that the product market is topping out. We look for packers to get their kills full without a lot of effort, which is why we think the summer months have flattened to a certain extent. It feels as if the packers are reaching for product right now, the reason is the weights. Weights from year ago in late May were 282.9 pounds while this year they are just above 280. This is more than just a seasonal decline and may indicate a producer psychology of “let’s get as many to market as we can at these prices levels”. It has certainly been bullish for the near term contracts.
The following is a breakdown of how the five primal pork cuts traded last week and my current analysis of each one going forward.
Primal Opened Tuesday 5/30 Closed Friday 6/2 Price trend
Pork loins 87.64 90.88 Toppy
The market is being driven by the bone in, and the boneless loins aren’t moving and are backing up.
Butts 108.48 108.76 Steady at best .
But will also top out in the next week to 10 days. The spread between loins and butts is too wide at 17.88 and should narrow to 12.00 or less.
Picnics 58.97 60.30 Steady
Could go lower in the coming weeks
Ribs 141.81 144.01 Topped out for the year,
Ribs from here forward will be on the defensive. There are too many in the freezer and they have to be cleared by the July 4th holiday. Given the quantity left that won’t happen unless prices are cut.
Hams 65.82 64.38 Will lose 4 to 5 cents
Hams are in a little trouble Canada has one packer selling them into the US because of they were delisted by China due to ractopamine found in a sample.
Belly 143.84 148.75 Up 7 cents
Bellies are the bright spot going forward they could go to 160 before finding resistance.
Weekly Carcass 89.11 90.76 Support early week
The carcass cutout may find support early week but I do not look for that to hold. Overall the product market with the exception of bellies will be under pressure.
Be ready for the following futures trades. Editors note: once the newsletter list comes out, we will publish recommendations delivered into your email box or via phone if you have a Daniels Broker:
- Take profits on the June/July bull spreads
- Sell July hogs on price spikes
- Back spread buy LHZ sell LHN at 20 dollars to the July
- Sell a ‘few’ October hogs on price rally’s and be patient.
- Pay attention to the weather. If we get extreme sustained heat being short summer hogs can get painful.
We look for the market to start topping out over the next week or so, it may have already begun. Memorial Day is behind us and the retailers will just need to replace what they have sold. We look for the retailer and the processor to start resisting these price levels, as well as the product giving up some of the gains it has had the past ten days. The pork bellies may be the exception to this as the frozen stocks (or lack of) are very supportive to pork belly prices, staying strong at least through the end of June. We need to be watching this. You will find this phrase repeated consistently if you read us every week: as the bellies go, so do the hog prices.
Until next week, thank you for reading The Swine Times.
Livestock Futures and Options to Hedging
If you are interested in the livestock commodity futures industry but feel you could use more information to get started, then download this self-study guide to learn the fundamentals of futures trading and hedging. You will receive an incredibly detailed, step-by-step explanation of the life of a livestock futures contract, as well as what tools you will need to possibly realize your goals.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.