Lean Hog Prices on the Rise

October 31, 2018 8:45AM CDT

The December lean hog prices rallied this past week, leaving the futures to a more normal discount to the cash market and a narrowed basis. Friday, we saw a rally through the 200-day moving average and close above 58.00. In the near-term, there looks to be weak export demand with record production and high levels of cold storage stocks. Monday, the market opened and gapped higher, but failed to fill the gap that day, eventually closing higher. Yesterday’s trade was down, but still failed to fill the gap from Monday’s opening.

If the market falls in the short term, I don’t see it falling through the 200-day moving average (57.50) or the 58.00 price level. The spread of African Swine Flu in China is driving up the prices of the December contract. If China were to lose 16% or more of their herd then that would equate to all the global trade in pork for 2017. On a technical basis, there is positive momentum now, but it looks that we are in overbought territory with the RSI number starting to creep up to the 65 number (currently 63.62). A breakthrough and close above the 59.50 price level should test the second resistance level of 60.75. It looks that the opening will be higher in the Dec hog contract and I could see this market breaking through $60 price level due to the continued outbreak of ASF.

Lean Hogs Dec '18 Daily Chart

Lean Hogs Dec '18 Daily Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.