Jerry Welch, Commodity Insite!
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Below is my weekly newspaper column, Commodity Insite published on February 9, entitled, Omens and Oinkers. Since lean hog futures over the past week have become the single strongest ag-commodity on the face of the globe I thought it timely to re-print it here on Inside Futures for the first time.
February 8, 2019
Omens and Oinkers
There was an omen this week that may prove to be prophetic for the year ahead with one of the most basic of all commodities. But before I discuss exactly what that omen happens to be allow me to quote a few lines from my book, Back To The Futures, a lighthearted look at the commodity markets in the 1980s. And in the 80s, Bobby McFerrin penned a song entitled, Dont worry, be happy! His tune defined perfectly that decade.
In chapter from, Back To The Futures entitled, Superstitions, ( commodityinsite.com ) I stated the following. "One of the most paranoid and superstitious groups of people are commodity traders. Anyone that has ever participated in the futures markets will tell you the same thing. The reason for feelings of paranoia and superstition rests with the general uncertainty of markets. The commodity markets change directions so quickly that the traders are in constant fear of losing money. Or, giving back profits."
In the chapter above I wrote. "Omens. Commodity traders revere and respect omens. Never do they scoff at omens or ridicule their potential effect upon the markets. For example, if a commodity trader stops at too many traffic lights while driving to work, its an omen meaning that the markets are going to mistreat him that day. On top of that, anytime anything goes wrong with any part of a commodity traders life, it is an omen portending a coming disaster in the markets. I am always on the alert for an omen because they work in mysterious ways."
On February 5, 2019, people across the world celebrated the first day of the Chinese Lunar New Year, dubbed by the Chinese zodiac cycle as the, Year of the Pig, an animal which symbolises wealth. And that is where the omen comes into play that I touched on in the the first paragraph of this column.
I cannot recall a commodity market over the past year that has had so much written about it as pigs or hogs. More specifically, the problem of the, African swine fever epidemic in China. Here are but a handful of the headlines about that potentially catastrophic event. "African swine fever has Chinese pork industry in a sweat. Deadly virus is nearly always fatal to pigs, threatening world's largest market. Worlds largest pork producer in crisis: Chinas African Swine Fever outbreak." Believe me, there are too many headlines to list here!
It has been bad enough reading about the swine fever issue in China but then this headline popped up a few days ago. From Japantimes.com with a headline that blared, Japan's government warns of 'extremely serious situation' as swine fever spreads to five prefectures. Yes, African swine fever has now been found in Japan!
From the article above; "A swine fever epidemic is continuing to spread in Japan, with local authorities saying they are struggling to contain the highly contagious pig virus that was first reported in September. The total number of pigs to be culled at affected farms is expected to reach 15,000. The disease does not affect humans even if meat from an infected animal is consumed, but it is fatal to pigs. We are facing an extremely serious situation, agriculture minister Takamori Yoshikawa told a meeting at his ministry in Tokyo."
Though the media and virtually everyone in the commodity futures industry have taken the African Swine Fever issue as a serious threat to the worlds swine-herds, hog prices have yet to respond in a bullish manner. For example, the high for lean hog futures in 2017 ( a 4 year high) was a bit over $94. In 18, the high was near $85 but this week, nearby hog futures touched $55. Obviously, the hog market is not worried about swine fever.
But I am. There are too many bullish omens and a tsunami of news about African swine fever for hog prices to remain depressed much longer. Sometime, sooner than later, it would not surprise me one bit to watch hog futures skyrocket upward in a wildly bullish fashion if the swine fever continues to get out of hand.
This is the Year of the Pig and the pig symbolizes wealth. What more could a commodity trader ask for in the way of an omen? Not much in my opinion.
Historically, it is not unusual when bullish or bearish news is well known but prices fail to respond accordingly. I believe the US hog futures market is now caught in just one of those times. How long it lasts remains to be seen. But based on recent news, this being the Year of the Pig and hog futures woefully depressed, I doubt the oinker market can remain bearish for much longer.
Check out, Haunted By Markets to grasp the history of the futures markets at commodityinsite.com
My column above has not appeared here on Inside Futures until today. I hope you found it of interest. I also hope you were not short lean hog futures that have rallied $13.70 basis April since February 20. The oinkers are on a roll!
And here is a paragraph from my column this week entitled, Game Changer that will be sent to the handful of newspapers that have been kind enough to publish my ramblings for the past 30 years. My column is also sent to those that subscribe to Commodity Insite, my twice a day newsletter and my brokerage clients. Those that recently purchased my book, Haunted By Markets also receive my weekly column.
There is no substitute for timely and accurate information. Do not be left behind. The most bullish environment in the history of US agricultural is unfolding. Do not be left behind.
If you wish to know more about Commodity Insite drop me a line at email@example.com. Or, call me at 406 579 7482.
Do we live in exciting times or what!
The time now is 7:17 a.m. Chicago
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