Lean Hog Prices Poised to Climb in 2009

Bloomberg reports that "In the worst year for commodities in at least five decades, hogs rose 6.6 percent, the second-biggest gains on the Reuters/Jefferies CRB Commodity Index, behind cocoa."

The article quotes fund manager Mark Greenwood: “We’re going to have 3 to 4 percent less pigs next year, and that should be very supportive to higher pork prices."

“In the middle and latter stages of recession, energy and base-metals markets tend to underperform,” Barclays Capital said in its 2009 commodity outlook report to clients on Dec. 18. “Gold, agriculture and livestock tend to outperform other commodities, and it is these sectors that could prove most robust in early 2009.”

The 2008 commodity rally petered out before rising meat prices had a chance to join the party, as we had hypothesized back in May. Our theory was that higher feed inputs (corn, soybeans) would eventually pass through and result in higher meat prices. Interestingly, the Bloomberg article mentions one producer who unfortunately is locked into $6 corn until the end of 2009.

Corn and Live Cattle News and Thoughts

Tom Dyson writes in DailyWealth that he believes corn prices are set to drop sharply - and reiterates his favorite plays are live cattle.

After thinking about corn a bit, I also now believe that there is more risk on the downside. Potential catalysts for sending corn lower are the impending bust of corn-based ethanol, and a bumper crop. Catalysts that would send corn higher would be a wiped out crop. However with the bearish news that has come out in the past couple of weeks, it's looking more and more like the crop is fine.

I recently dipped my toe in this trade, and shorted the Dec Mini-corn contract yesterday. I may look to add another Mini contract or two on further weakness, and will close the position on any significant sign of price strength.

On the live cattle front, here's a quick take by Dennis Smith over at Barchart.com. He believes the recent sell-off in live cattle is overdone, and is looking to re-enter the position when support is found.

I still have one live cattle contract that - somehow - I have not been stopped out of yet. Hanging on by a thread. But I am also looking at the longer dated live cattle and lean hog contracts closely.

DailyWealth: Hogs to Hit Records Soon

The DailyWealth team has been all over this story - record corn prices, which will soon produce record hog prices.

Agree with the hypothesis 100%, but not sure if I completely agree with the way to play it. My plan is to keep an eye on those mid '09 contracts...wish I had kept an eye sooner, as I now see they have been moving up aggressively. However they look to be in the middle of a consolidation, and I'll look to enter on the next leg up.

Basics on Trading Meat Futures

Nice article here by Kevin Kerr on the basics of the meat markets and trading meat futures.

Everything sure is setup for higher meat prices. I think this is a temporary breather this week, as the live cattle charts were going parabolic for the last couple of weeks.

I have not checked my account since Sunday - I don't want to see the raw $$$ I'm off. Instead I'm just watching the charts and trying to keep perspective on things - by later next year and early next year, these prices are most likely higher, so I want to ride this through thick and thin.