Online Trading Education

Hog Wild

Since the Pork Belly market was terminated by the CME, Lean Hogs have been the contract of choice for trading pigs. Global demand is picking up and supplies remain tight. Hogs made a new high in July, fell off into the slaughtering month of September, and turned back around going into the end of the year as the higher prices led producers to bring more of the beasts to slaughter. Producers had a rough 2012, selling their herd for an average of a $17 loss per head. High grain prices were the main problem, but also contributing was a weak per pound weight with the average hog weigh in at just 207 lbs vs. an average of 210 lbs. Bacon could possibly come in short supply with those numbers.

Since the beginning of the year, prices and the outlook have rebounded, leaving producers enthusiastically looking for higher margins as they see softening grain prices and respectable prices in 2013. Seasonally, Hog futures tend to experience a rise in prices from January 15 to February 15, having done so in eight of the last 10 years.

The chart below is weekly chart of Lean Hogs with a 3, 21, 65 SMA. Notice that the 83-84 area is holding support. Buying in this area will minimize the risk. Above 87, Hogs should go back to 90 and possibly retesting the highs last summer. Closing below 82, hogs will be weak looking to test 77. Good luck Trading!