Porchine Epidemic Diarrhea virus or PEDv has killed millions of pigs, sharply reducing supplies of marketable animals in the US and fueling one of the biggest rallies the hog market has ever seen. Yesterday’s announcement that a second animal health company, Zeotis Inc., joined Harrisvaccines Inc. and received a license to begin producing a vaccine against PDEv was enough to cap a retracement rally in lean hog futures that began two weeks ago. Corn also made new lows yesterday, reducing the cost to feed hogs and encouraging more production.
Hogs have retraced half of the 23 cents per pound down move that negated this year’s uptrend two weeks ago. Prices are stalling against the now downward-sloping 40-day moving average. This gives us the perfect opportunity to take a low-cost short position.
We are currently recommending a put strategy in the December contract that has a total cost and risk of approximately $460 plus transaction costs. The potential payout is as much as $1,540 should December lean Hog futures reach our 80 cents per pound objective on or prior to option expiration on December 12, 2014.
Prices can and do change – in fact this move may already be starting – so RMB trading customers should contact their personal broker for the latest.
If you don’t have an RMB Group account and would like to know more about “Big Move” strategies that we are currently recommending in other markets, give us a call at 800-345-7026 toll free or 312-373-4970 direct. You can also email suerutsen@rmbgroup.com or visit us online at www.rmbgroup.com.
Important Euro Update!: Today’s decision by the ECB to reduce European interest rates caused the bottom to drop out of the common currency. This is great news for our bearish put strategies. The Euro is down 171 points as we write this and is currently trading at $1.2975. It has already reached our first long-term downside objective of $1.3050 and appears well on its way to our second objective of $1.2750.