wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(March 26, 1997)
LEAN HOGS:
The news that Taiwan was suspending exports due to an outbreak of hoof and mouth disease was met with aggressive buying. Currently a bit of consolidation is taking place, as traders take profits and even up before Thursday's hog report. A bearish report is possible, as the last report was a bit of a bullish surprise, and this report may adjust the numbers. If the report is bearish, it is probably a buy. Conversely, a bullish report may be met with renewed aggressive buying. A Taiwanese agricultural official estimated that exports may be disrupted up to 5 years. While that may be a subject of conjecture, one thing is not, and that is that the disease, first found in 9 breeding locations, has now been found in 716 different locations. Aggressive traders should buy April or June hogs on 50-150 point pullbacks with stops of 100 or so points. April hogs have the potential to test the highs, although it is a bit premature to count on it, and it is likely that June hogs have another 300-500 points in their move. The primary hazard to higher prices is that domestic prices are already high, and consumer resistance may develop, especially if beef prices continue to languish. Option traders should buy April or June near the money calls on pullbacks. M. Steven Morgan
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