Getting right to the chase, lean hogs rallied sharply yesterday as traders are becoming impressed with the inability of packers to break the cash. Indeed, at the moment they have very little incentive to back bids off severely. Margins are the best they’ve been since last fall and highly profitable. Cutout continues to hold impressively with bellies holding record highs. Some analysts don’t want to describe bellies as a shortage. However, when you’re producing record large amounts of pork and belly prices are still record high, I think its accurate to say you have a shortage. Current demand has still not peaked and it’s taking all of the fresh. There’s virtually none in storage and we will get an update on frozen stocks Monday. With Aug futures $10 under the index and the cash not breaking sharply, futures rallied impressively on Wednesday. If there’s any weakness into Friday’s close we’ll be looking at some Aug calls.

I am still cautiously bearish hogs. Sold 5 Aug hogs yesterday at 82.95, offset this morning at 81.75. I also sold 5 Oct hogs yesterday at 68.60 and have an order in at 68.25 to offset. Yesterday I also made a day trade on Oct for a small profit.

Dewey