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Anyone considering trading in the pork complex should be aware that, unlike
broader based markets that tend to lend themselves to technical analysis of
money flows, Hogs and particularly Bellies, are relatively thin markets that
are very sensitive to the cash price or more accurately, anticipation of
what the price WILL be in the foreseeable future. When I traded these
markets regularly, I was aware of the trading actions of one large local who
made millions of dollars each year for several years. While technically
aware, this trader's edge came from an extensive network of close contacts
in each segment of the cash business. He spoke daily with a pork buyer for
a large grocery chain about retail demand. He had relationships with
several packing houses that provided insight on when packers would be buying
animals to meet retail demand and when they might reduce slaughter to force
price increases in the grocery store. He regularly shared his market
perspective with friends who were large pork farmers in return for
indications of their current and future production and marketing intentions.
He then compiled all the info he gathered with known market facts (including
frozen stocks, foreign demand, seasonality, etc.) in a statistical data base
which compared current market conditions to previous ones. By accurately
anticipating cash prices, he made lots of money on sizable positions in the
futures markets.
Most traders in smaller, less liquid markets, particularly agricultural
markets typically dominated by larger commercials, will never have the
access to supply and demand information equivalent to those who deal in the
physical commodity. As a technical trader, I prefer markets like bonds and
indexes where broad participation mitigates against manipulation by the few
and the price charts can more reliably reveal the changing balance between
buyers and sellers.
Best regards,
Jim Alvis
----- Original Message -----
From: "Don Roos" <rosewood@xxxxxxxxxxxxx>
To: "Omega List (E-mail)" <omega-list@xxxxxxxxxx>
Sent: Wednesday, November 28, 2001 1:30 PM
Subject: Re: smithfield and pork futures
> Trading in an arena such as this (livestock) is actually less risky than
> trading what most of us trade, the indices. The fills in the cme
livestock
> pits are very good, except PB (pork bellies) and the trading is very
active,
> even in outmonths.
>
> A good way to trade this type of future, if not experienced, is to
consider
> spread trading. One is more likely to be successful in starting with this
> type of trading than non-hedged trading. Using the guidance of a seasonal
> research, one can find highly successful trades that may not be as sexy as
> doing discretionary or system trading of the spoos or minis, but may allow
> you to keep your account in the black long enough to learn the ropes as
well
> as gradually learn discretionary methods. A good resource is MRCI, Moore
> Research Center, in Oregon. (No affiliation or connection, except as a
> customer). http://www.mrci.com/ I was told by a highly successful trader
> that started as a spread trader and has used Moore for years, that I
should
> look upon the research and trades they recommend as a system to follow.
The
> difference is that Moore does the research rather than me (which is
> appealing after spending over a year developing a system for emini
trading).
>
> Good luck,
>
> Don
>
>
>
> ----- Original Message -----
> From: "Robin Cotten" <rcotten@xxxxxxxxxxxx>
> To: "Omega List (E-mail)" <omega-list@xxxxxxxxxx>
> Sent: Wednesday, November 28, 2001 11:49 AM
> Subject: smithfield and pork futures
>
>
> 1. You can't depend on using just 1 live hog future. You need M to
> represent the summer highs and you need Z to represent the fall lows.
> This year the drop was 40% and this isn't uncommon at all. So at a
> minimum, average the 2 months together.
>
> 2. While most houses need futures at 5400 to breakeven, Smithfield's
> break even is probably more like 5000.
>
> 3. This all assumes that corn is around today's prices.
>
> Good luck,
>
> Robin
>
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