Will Pork Price Plunge Persist?
Today’s Spotlight Market
While U.S. Hog producers are currently seeing profit margins erode due to lower cash prices, there is some good news going into 2016. The cost of feed is expected to be lower next year as ample supplies of both Corn and Soybean Meal should keep prices in check in the coming months which will greatly help the bottom line for livestock producers in general.
Fundamentals
It is getting tough to be a Hog producer or meat packer of late as falling cash market prices combined with a full pork pipeline to the retail sector have hurt profit margins. Producers are just barely breaking even at current cash prices when as little as 1 month ago per head profit was nearing $20. The Pork packing industry is in better shape than producers, but have seen margins decline as well. Cash Hogs were trading between $0.50 and $1.50 per hundredweight lower than previous sales, as meat packers are lowering bids due to current large supplies of pork available in the wholesale market. Futures traders are anticipating further weakness in cash market prices as the lead month December futures are trading at a very wide 13-cent discount to cash prices currently, while December futures typically trade at a discount to cash prices this time of year, this season?s discount is well above average and any firmness in pork prices could lead to a short-covering rally in the December futures in the next few weeks.????? ?
Technical Notes – View Today’s Chart
Looking at the daily chart for December Lean Hog futures, we notice how quickly futures prices have plunged the past two weeks sending price to a test of contract lows. We have seen the 20-day moving average cross below the widely watched 200-day moving average, which is generally interpreted as a bearish technical signal. The 14-day RSI has entered oversold territory with a current reading of 25.65. The most recent Commitment of Traders report shows non-commercial trades continuing to lighten their net long position, while commercials are removing short-hedges as prices move lower. The contract low of 57.050 is seen as the next support level for the December futures, with resistance found near 61.500.????
—————————————————————————————————–
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the “Disclosure Statement for Futures and Options” prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.