The average K/M spread over the past six-years has been -2.85 with a six-year high of +1.68 and a six-year low of -8.52 . On this date the average spread has been -2.80 with a high of -1.05 and a low of 4.15. This means that yesterday's low of -4.70 set a six-year low for this date. The six-year average cash settlement has been -4.69 with a high six-year cash settlement of -0.45 and a low of -7.78. The high for the K8/M8 has been -2.625 and the low has been -4.90.

Some years the supply of market ready hogs tightens up in front of the Memorial Day holiday and packers start scrambling to find hogs to meet their kill needs. The last H&P report is not suggesting that will be the case this year unless there is a surge in demand.

With the spread posting a new six-year low for this date and quite a bit of time until cash settlement, I have decided that a long K/M spread is a reasonable risk. I have orders working to buy at -4.90, -5.30 and -5.90. Trading the K/M spread often requires a lot of patience.

Best wishes,

dhm