LEAN HOGS

Yesterday at this time I was disgusted with the hog market, disgusted with the fact that June hogs can’t catch fire. Just about this time, apparently, is when the fundamentals began to catch. Cash hog prices were up $1.50 yesterday and the cutout surged upward, quoted up $1.27 at $85.62. This took out last week’s cutout (high) and represents a new high for the spring/summer. You have to go back to last Oct to find a higher cutout value. Finally, open interest jumped sharply in hog futures on yesterday’s rally. I mentioned this perhaps one or two weeks ago, in my opinion the nice recovery in crude oil prices is bullish toward pork exports. Many counties that import U.S. pork have economies that are very dependent on oil revenue. In addition, it’s my opinion there’s something really bullish brewing in China. Pork prices are record high and now producers are retaining gilts, making supplies even tighter. The Chinese authorities are attempting to reduce meat consumption in China. Are you kidding? The Chinese middle class is increasing to the tune of about 380 million residents each year. That’s almost the total population of the United States. These people want to consume more meat, not less. From a demand perspective we are bullish toward pork, beef, corn and soybeans. Recommend holding all bullish option positions.

DH, I guess the Chinese equation has finally taken hold! I just sold some more August and have orders in to sell more July! I hate it when I am opposite Dennis in the hogs! This could be a long hard trade for me, your June doesn't have long to go.
Dewey