Lean hog futures continued their mild rebound. Today marks the seventh day since the Nov. 15 minor low was placed; Though cattle prices did have a sharp drop from spring highs down to summer lows, the general theme since August has been bullish.
It is our belief that this rally in hogs is ending. We may not go right back down but certainly, need to see better news in this market quickly. December live cattle futures came within 15 cents of retesting the September 22 mini-price peak.
Futures traded mixed Monday, lower in the morning but up by the afternoon. The likely reason was more of a gap-filling move on the December than any real change in fundamentals. The December exactly filled the upside gap to 57.75. The type of day, with a lower low than the previous session but also a higher high, is called an Outside Day. The close higher implies slightly higher trade tomorrow morning.
Over the years as we have covered various sectors — from energies to stocks and stock indexes to fixed income to forex; and different asset classes from futures to equities to exchanges traded funds — trading has grown more complex.
The October contract has risen 5.25 off their lows from the 1st. This is not that unusual. As noted all last week, the market often does not like to the August expire and the next contract out hold such a steep discount to current cash prices. We can argue all we want that this discount is needed, and may, in fact, be too small based on the supply change coming, but that does not matter. From a simple optics perspective, a $20 discount is too much.