wmeubank@ocp.kcmo.com
R.J. O'BRIEN ASSOCIATES, INC.
555 W. Jackson Blvd, Chicago, Illinois, 60601
(November 13, 1997) HOGS: KEY REVERSAL IN THE FEBRUARY–Hogs have been frustratingly sideways since September. The hope of improved demand dashed by the reality of heavy kills and high weights. After reviewing our last letter, not much has changed. Kills running over pig crop estimates and weights record heavy. Hams sharply mixed with light ones (the desired ones at holiday time), ever higher due to the fact there's no light weight hogs around. Cash bellies up 5-10 then down 5-10 as lack of storage interest keeps them, or tries to, into consumption. Loins a disaster and, while they might bottom domestically, no Japanese interest yet. The bear news then firmly entrenched. What's the positive news then? Well, the February contract had a key reversal at new contract lows. Not as dependable as one in the grains but must be respected anyway. The next two weeks or so usually is the seasonal lows. The packers have shown a better interest in heavier Saturday kills lately i.e., paying up sharply late week and, of course, we're still at discount to the live index. We may, therefore, have to turn our attention to the February and leave the December alone i.e., if one buys a sharp break, do it in the February. Risk is well defined to us. A new contract low negates the key reversal. Also, then watch the December, if it settles over the 45-50 day moving averages, could confirm the lows.
John W. Kleist
Commodity Consultant
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