2021 was a good trading year for you, Dewey. May 2022 turn out just as well!!

A number of years ago I read a book called STOCK MARKET LOGIC written by Norman Fosback. In it he said,

"The Seasonality Indicator is potentially one of the most useful of all short term market indicators. But not surprisingly, it is a bit more complex and the profit opportunities, while ultimately enormous, are not so readily apparent.

"How then can you use seasonality to benefit you and increase the value of your own portfolio?"
Stock Market Logic p.155

It seems to me that the "Seasonality Price Trend" is stronger and more consistent in the hog market than in any other market because of the biology of hog reproduction. The conception rate is always lower during the hot summer months and the mortality rate amongst the piglets is always higher during the cold winter months causing the pig crop during the winter to be lower thus the marketing of hogs during May, June and July tends to decline.

There is always a seasonality high and a seasonality low in the hog market with the high having a strong tendency to occur around July 4th and the low to occur around December 10th. But the question remains, "How then can you use seasonality to benefit you and increase the value of your own portfolio?"

I have been following the logic that ITZ pointed out a number of years ago that cattle feeders tend to fill their feed lots with cattle during the fall when cattle come off pastures. These cattle tend to come to market during the summer causing a mild over supply. At the same time there tends to be a dip in the number of hogs coming to market during that time period resulting in the firming of hog prices.

So -

Some time during the winter when the June cattle/hog spread is high you sell June cattle and buy June hogs. Recently the spread was an unbelievable +45.00 with cattle premium to the hogs. Last year it settled with HOGS premium to cattle by a couple of bucks. Well, I don't think hogs will go premium to cattle this year but my observation is that June cattle tend to settle premium to June hogs by 15 to 30. I am short the spread at 42.85 and will be a happy camper if we get to what I think of as a 'USUAL'' range of 15 to 30.

Just a thought.

Best wishes,

Doc