From our earlier days in the trading pit, we seem to remember the old rule of thumb that traders ought to buy market declines at this time of year. Seasonally speaking, we should be entering a time period in which consumer demand tends to increase substantially for beef. Although the seasonal increase in demand for pork tends to occur a little later (more towards the summer), hog futures often tag along for the ride with cattle.
Will seasonal strength occur this year? Will declining consumer wealth hurt demand for beef and pork? What does history suggest?
Q: What has happened in the past when, during the first quarter of the year, April Hogs and Cattle both gap lower on the same day?
A: Cattle futures have tended to rally, climbing 72% to 78% of the time, at the end of one to four weeks later. Average gains have been as much as three times that of average losses. Hog futures have also rallied, but the winning percentage has been smaller, with prices climbing 61% to 67% of the time. Average gains here have been better than average losses.
Robert J. O'Brien Jr. is President of County Cork, LLC, a Commodity Trading Advisor (CTA) based in Skokie, Illinois.
