The ASF epidemic is continuing across Asia. Some estimates project 200 million hogs will be lost. To date the number may be closer to 5 million. This is contributing to escalating food prices. Most likely it will take years for pork production to fully recover. When a shortage develops, demand often pushes the nearby prices up faster than the deferred prices.

There may be an opportunity to take advantage of this tendency by buying the N/Q spread.

Over the past 8-years the average spread has been +0.676 during the last 270-days of trading. During this 8-year period the average cash settlement has been +4.69. The largest spread at cash settlement was 11.79 in 2018 and the lowest was -9.325 in 2019. In only one of the last eight years was the spread negative at cash settlement and that was in 2019. Before it went negative, it hit a high of +1.85 on 6/12/19 just before the MMM19s went to cash settlement.

It settled Friday at +0.250 and that may be a good place to get long.

Best wishes,

Doc