Hello hog traders
Last week saw continued spread and flat price hog action. CME hog futures fell to new lows at the start of the week and were sharply higher at Friday’s close for all markets except February. Coronavirus continues to spread across China and the world, but the recovery rate is quickly exceeding the death rate and the number of new infected cases is now in decline. The solution to the virus (containment) has been crippling for the Chinese and emerging market economies. Dates are being set to get business moving again, which has helped sooth demand concern for pork exports. Export demand marked the 2nd consecutive month of more than 20% growth, which helped cushion the seasonal decline in US cash prices. High demand is being countered by high supply, the latter is probably going to falter first.
Excessive fund length and the future’s premium has been fleshed out of the market. Outstanding export sales are record large with more than half of the total sales to China. Bull spreads in J-Q and M-Q will be our ideal positions, we may even look at M-V. Q3 contracts should be sold on rallies while Q2 contracts should be bought on breaks. We are bullish the J as prices have been over discounted in that month. Feb was a disaster contract, hopefully it can finish strong this week.
LONG 1 UNIT OF FEB HOGS
LONG 1 UNIT OF JUNE HOGS
SHORT 2 UNITS OF AUG HOGS
LOOKING INTO NEXT WEEK:
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