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Did Lean Hog Prices Catch Swine Flu? Answer: N-O
Over the last month, lean hog prices have gone to slaughter: By May 4, the market was on the chopping block at a new contract low.
It took the mainstream experts approximately .009 seconds to call out the giant pink Pig in the room: Swine Flu. Truth be told, the H1N1 virus is the fundamental Grand Pooh-Bah. Nothing tops this event in terms of its suggested negative influence on the pork industry. Already, hundreds of thousands of pigs have been culled, several countries have placed import bans on pig meat, and widespread panic has crippled its demand.
Here, the following news items from late April/early May put two-and-two together:
- "Swine Flu Jitters Spark Sell-off In US Hogs." (Reuters)
- "Swine Flu Fears Depress [Pork] Markets." (Wall Street Journal)
- "Swine Flu Story Will Dominate Lean Hog Futures. In the short-term, markets will react to the downside, possibly violently to the downside." (Inside Futures)
Nice theory. Problem is it doesn't pan out in reality.
Here are the facts: The lean hog market was "reacting to the downside" long BEFORE the words "Swine Flu" became synonymous with "Pandemic," "Panic," or "Plague." The most recent downtrend in Hogs began on April 9, more than one week before the Center for Disease Control & Prevention (CDC) reported the first case of swine flu in the United States. (On April 17) On April 21, the CDC announced that "human-to-human transmission of this new influenza virus has occurred."
In the April 7 Daily Futures Junctures, long-time editor and Elliott Wave International's chief commodity expert Jeffrey Kennedy used NOT a flu strain, but a wave structure to gauge the bearish "internal" health of lean hogs. In that publication, Jeffrey presented the following close-up of hogs and wrote:
"Short-term wave patterns suggest that the end of a second wave [rally] is close at hand. One more modest push beyond 73.90 is all that is needed to finalize this wave... and signal that the decline from the March high is continuing. "
The sell-off into the May 4 contract low speaks volumes.
Now, find out whether the losing streak for Leans is over -- May 6
Daily Futures Junctures. Click here to begin.