Weekly US hog market review: large US slaughter numbers inhibit future price rallies
The lean hog futures market appears to be overdone on the downside at present, with the longer-term monthly chart also suggesting limited downside price potential at present levels.
by Jim Wyckoff, The Pig Site
7 February 2020
The hog market has been beaten down recently by the coronavirus outbreak in China prompting fears regarding Chinese demand for pork, as well as the outbreak causing global economic growth be nicked in the first quarter. However, by mid-week this week the coronavirus scare seems to have passed, as seen by rallying global stock markets. Importantly, the move by China’s central bank this week to inject short-term liquidity into the Chinese financial system to support domestic businesses hurt by the coronavirus outbreak, sent a signal to the global marketplace that China intends to blunt any negative effects from the illness. And, as one long-time market analyst said, “The Chinese people still have to eat.”
As is often the case, an unexpected shock to the marketplace is initially deemed by traders as being close to a worst-case scenario and market prices react accordingly. Then, such turns out not to be the case, as is apparently so with the coronavirus outbreak. As seen in my analytical charts below, the lean hog futures market appears to be overdone on the downside at present, with the longer-term monthly chart also suggesting limited downside price potential at present levels. While the charts are suggesting not much further price pressure in lean hog futures, continued large US slaughter numbers will keep a lid on any futures price rallies.
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