wmeubank@ocp.kcmo.com
(May 8, 1997) LIVE HOGS: The pork complex was mostly firm, but volatile during the past week as continued anticipation of strong foreign business and mostly light hog runs sparked support. The cash hog market was basically up $1.00 versus a week earlier as hog tops were posted at $57.00 to $59.50. The packers had to push a bit to meet slaughter needs which gave the cash market a boost as the week came to a close. This did come as a surprise as the packers bottomline is deep in the red and the effects must not seem great enough for them to cut back their slaughter rates. The latter fact is probably the only reason that the market has held well at a time of declining margins, but if the hog supply does increase it could spell disaster for prices. Overall, market internals remain in a fairly weak state and if the packers have already put up the supply needed to serve Japanese needs the picture could turn very bleak. The latter situation appears to be true and couple that with poor domestic demand and it spells trouble. Technically, June live hogs are in an uptrend; the trend would turn down on a close below $83.05; a close below $83.32 would target the market to the $80.05.
FUTURES STRATEGY--Short LHM at $84.42. Maintain a protective buy stop close only at $86.60.
OPTIONS STRATEGY--Short LHM $90.00 calls at $.90. Maintain a protective buy stop at $2.10.
Tony Montini
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