Hello hog traders!
The Feb Aug spread is getting licked today as money runs out of the front of the curve. We think this is a bit over done up front and want to buy the April and Sell an Aug. We believe the packer is going to need to keep the kill strong over the next several months no matter what. They have committed a lot of product via exports in recent weeks and the break up front will only encourage them to continue to produce. This is really more of a spread against Aug. The Aug (and Oct) contract is staring down what we feel is an Armageddon scenario where we have massive hog herds with no place for them to go. We are going to try and price at 14.00, it traded there this morning for a minute or two but immediately rallied to 13.60. We are going to be patient for a few hours, you don’t have to be if you don’t want to. We will likely try to fill this today at some point. I’ll check back in later to let you know.
Recommendation:
Buy 1 unit of April hogs
Sell 1 unit of August hogs
This will leave you:
LONG 1 FEB HOGS
LONG 1 APRIL HOG
SHORT 2 AUGUST HOG
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