Important points on these charts

Look at these two charts:

Chicago lean hogs

Chicago lean hogs

Chicago old crop oats

Chicago old crop oats

Those are a couple of markets going down pretty steadily. But each, in its own unique way, should be set for a turnaround if long-term trends prevail.

Oats has pierced the psychologically-important $2 per bushel level, which means even dummies notice it’s happened. That can scare out anyone who can still be made bearish, and drive down prices more, but prices have gotten to a level they don’t often stay at. As one analyst I covered a couple of years ago said, ‘Oats under two bucks? Why wouldn’t I want to own that?’  In other words, some folks are likely to see these sub-$2.00 prices as a good point at which to buy-in. That doesn’t mean an immediate rebound, but momentum tends to start turning sometime around now.

An analyst I spoke with this morning told me commercial buying is increasing right now, but it isn’t enough right now to counteract the reality of huge stocks that are only gently sinking. However, at a certain point things will likely get better, and you can see that with new crop futures prices. The prices in the chart below aren’t radically higher, but they’re a lot better and show that the market realizes farmers are likely to plant a lot fewer acres of oats this spring.

Chicago new crop oats

Chicago new crop oats

The trend’s been down too, but at $2.14 it’s easier to handle.

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With hogs we may be experiencing a premature Memorial Day phenomenon, a different analyst told me this morning. Hog prices tend to rise in the spring towards Memorial Day (a yankee holiday of some sort) but then begin to sell-off in the week before the holiday. That’s believed to be because everyone eats lots of pork on the BBQ during the holiday, so retailers bring in a lot in preparation. But a week before the holiday the packers ease off buying pigs because they will have already met the retailers’ needs and won’t be able to jam any more through the system before it. So prices settle down a bit, usually, before beginning another leg-up into summer.

I called this analyst because I remember last year when I was at the World Pork Expo in Des Moines, Iowa, and the spring rally suddenly died, and threw a pall over the already-downspirited event. With the recent slide in hog prices – they’re still profitable, but not as buoyant as they were – I was hoping to hear that this is probably just a temporary setback before a resumption of the rally, and that’s what I heard. Which was good to hear.

So with both oats and hogs we’ve been living through depressing markets recently, but there’s reasonable reason for hope in both and the summer seems set for better times in the markets.

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