wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(December 18, 1997) HOGS: A weak cash market has pressured the hogs a bit, but wintry conditions and ideas that cash is bottoming is lending support to the hogs. Hog runs are expected to decline, which should also offer support. Strikes at Canadian packing houses may offer support for the near term, as fewer hogs will be shipped to the U.S. It is estimated that Canada shipped 3000 fewer hogs this week than they did in the previous month. While this is friendly, the hogs don't disappear and could contribute to weakness when the strike is settled. Russia is expected to be a buyer of U.S. pork over the next six months. Asian economic weakness is a major negative for hog prices, so if the yen improvement is real, it could signal a more optimistic attitude coming into the hog market. Supplies are thought to be ample, and if Asian imports decline, ample could become burdensome. Funds are thought to be very short. If they decide to cover, the market could rally farther than most suspect.
RESISTANCE–Resistance basis February lies near 6050-6070, 6140, 6200-6210, 6290-6300, 6330, 6380.
SUPPORT–Basis February lies near 6000- 5980.
RECOMMENDATION–If very aggressive, traders might consider buying dips to near 6000 with 100-point stops. Look for a move to 6400-6500, although selling may emerge in the 6140 area. If very aggressive, look to sell there with 100-point stops. In any event, watch for a failure in that area. Seasonals suggest a low in this time frame. Option traders could consider buying February or April 6200, 6300 or 6400 calls near current levels for an eventual rally to the 6400-6500 area.
M. Steven Morgan
Hogs
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Cattle
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