Lean hog futures are down about 30% from this time last year, falling to $.57 per pound in the December contract on July 13th. The recent rally has bumped prices nearly 13% off the July lows. Based on technical, seasonal and fundamental resistance, we expect this rally to fail and hog prices to decline through the end of October and possibly through year’s end.
October lean hog futures’ attempt to rally over the last couple of weeks has run out of gas. Their turning point coincided nicely with technical, seasonal and fundamental resistance. Lets take a look at the combination of factors that could continue to drive this market lower through early September.
Hog futures have fallen approximately 30% between last November and the recent March lows near $.72 per/lb. This rapid and significant decline may be nearing an end as the commercial long hedgers come out buying with both hands because the market is approaching what they clearly feel is an important price level.
The lean hog futures’ volatility has provided tremendous opportunities for both the hog farmers and the packers this year. Their assessment of value fuels their collective trading requirements. This leaves the farmers selling production at the top and packers paying for consumption at the bottom. We use both of these groups in our discretionary trading at COTSignals.
You can see the results of the discretionary signals in the chart below.