Hog Prices Continue to Move Higher
Today’s Spotlight Market
Lean Hogs have rallied to record levels on fears that a deadly pig virus could wreak havoc on the supply of hogs.? The exact toll of the virus is yet to be known.? Next week?s quarterly USDA hogs and pigs report may offer traders some insight as to the scale of the damage the disease has done.? The report is slated to be released on Friday, March 28th at 2:00 pm central time, which is after the market close.? Until the report is released, volatility may remain high, as traders will be working on speculation and guesstimates. ?
Fundamentals
The Procine Epidemic Diarrhea virus has killed roughly 6 % of the Hog population, according to private estimates.? Prices have moved higher in anticipation that this number could be bigger.? If the deadly virus only affected 6 or less % of the Hog population, the market could find itself vulnerable to selling off.? Smithfield Foods, Inc, the world?s largest processor of pork suspended Hog slaughter at one of its North Carolina plants due to PEDv.? The Lean Hogs market finds itself overbought, both technically and fundamentally.? In addition to RSI readings in the 90?s, the Commitment of Traders report indicates that speculative net long positions have reached 98,252 contracts, which is a record net long position.? This could make the market extremely vulnerable to selling pressure, as traders could rush to take profits.? The cash market for Hogs remains very strong, as processors are paying hefty premiums to get pigs to slaughter, fearing that a larger outbreak could disrupt supplies.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the April Lean Hogs contract making a parabolic move higher.? More often than not, parabolic moves are followed by violent sell-offs, which could simply be a correction or bona fide reversal.? The chart does not yet give an indication of a reversal, so traders may be monitoring the chart and oscillators for signs that the market direction could shift.? It is of interest to note that the 14-day RSI indicator has peaked on March 4th and the indicator has been moving sideways to lower since.? Prices, on the other hand, have continued to move violently higher, only notching two negative sessions since the RSI had peaked.? This divergence may be offering a hint that a reversal could be on the horizon.
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