Weekly Purcell Report

by 5m Editor
15 January 2003, at 12:00am

US - Agricultural US Commodity Market Report by Wayne D. Purcell, Agricultural and Applied Economics, Virginia Tech.

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Hog futures are consolidating after the December 30 reports.

February shows an early-December high near $55, and July recorded a double top during December with two separate surges to $63.80. As a selective hedger, I would sell the July toward the $63.80 high and be prepared to buy the short hedges back if we see two consecutive closes above $63.80.

If you are not inclined to be that aggressive, sketch a trend line across the late October and mid-December lows and sell a close below that line. This same approach will work on the April, June, and August contracts as well.

It is not clear to me that we will see still higher prices given the numbers in the December 30 quarterly report.

Lean hog prices above $60 are very profitable for efficient producers, and these "profit windows" are usually closed quickly with increased slaughter weights and/or a cyclical expansion.

5m Editor