Today is the last day of the Goldman Roll. Yesterday the Oct/Dec hog spread appeared to bottom. This occurred despite the fact that cash hog prices continue to decline with additional pressure expected again today. Lean hog futures are sharply discount. In the face of huge, in fact record large slaughter, the cutout is down $1.82 so far this week. Packers have cracked the cash hard thus margins have actually improved this week and they’re highly profitable. Futures volume yesterday was active at just over 83,000 with open interest jumping by over 2,300 cars. It’s our opinion that hogs are trying for forge a bottom here but we don’t have much to hang our hat on. We thought a seasonal bottom was established two weeks ago until this was penetrated yesterday in the Oct contract. However, to be fair the lows from two weeks ago were not challenged in the Dec and Feb. What we do know is that huge volume trade has occurred this week in the fresh belly market. Most likely the active trade is users placing large quantities into the freezer. Users got caught big time last fall with no bellies in storage and they’re not likely to repeat this mistake. This could and likely does mean that belly prices, having declined by over $1.00 from the summer highs, are approaching a bottom. Based upon what has proven to be record large demand for U.S. pork we remain fundamentally bullish. Weekly export sales for pork were down 33% from the 4-week average with shipments down 3%. Obviously there’s nothing positive here.

My account is in the green, but not by much!
Dewey