The Pig Investment That Won’t Get You Slaughtered
For stock investors, getting into commodities can be a bit disarming – after all, buying things like grain, coffee, and hogs sounds more like a grocery run than a portfolio. But don’t be fooled: there’s significant gain potential in the commodity market. Today, I want to tell you about the easiest way to play one particular opportunity forming in lean hogs…
Higher lows since the beginning of June have formed a strong uptrend line across those bottoms for Hogs.
The upside 76 price resistance has been tested and retested repeatedly for the last six weeks without success… so far.
This from CNN Money:
“Where’s the bacon? Hog supplies have been squeezed for the last couple years, as high costs of feed, low demand during the recession and the H1N1 (swine flu) virus scare led farmers to cut back on production.
“On top of the already limited supply, the USDA forecasts pork production to drop another 3% this year.
“Even though they’re making money now, we’re not seeing much interest from producers in expanding their herds because they’re still trying to recover from those losses from the last two years,” said Tim Maiers, spokesman for the Illinois Pork Producers Association.
“The recent hot weather has also been a factor, causing pigs to eat less and farmers to take longer to fatten them up, said Steve Meyer, president of Paragon Economics, a livestock and meat marketing consulting firm.”
“In the past four weeks alone, 7% fewer hogs have been brought to market from a year ago, making it likely that this year’s pork production will decline even more than the USDA expects, he said.
“But despite tight supplies and higher prices, demand for bacon is stronger than ever, Maiers said.
“It’s become quite a trendy meat,” he said. “While they may be scaling back on other things, consumers are wanting lots and lots of bacon in whatever it is they’re eating or cooking.”
The immediate upside target on a Hog breakout is 80. For investors seeking to get the maximum gain potential, options are the way to go – but for now, the timing of the rally is going to dictate which option expiration to shoot foor.
[Editor’s Note: These days, options aren’t the only way to play commodities. Thanks to new investment tools like ETFs and ETNs, retail investors can make bets on commodity movements just as easily as buying or selling a stock. For a lean hog play, there are a couple of options open to investors right now:
The iPath DJ-UBS Livestock ETN (NYSE: COW) is an exchange-traded note that mirrors the performance of both cattle and hogs, with around 36% of its daily gains coming from hogs. Likewise, the PowerShares DB Agriculture Fund (NYSE: DBA) directly holds a 7.56% stake in lean hog futures.
Though these two funds aren’t as direct as a hog option play, they’re two viable trades for investors who want to get a foot in the door.]
It all comes back to commodities,
Alan Knuckman
Penny Sleuth
September 16, 2010
[Independence Note: Unlike scores of other penny stock resources, we’re 100% independent from the companies we talk about in the Sleuth – that means that we never accept compensation in exchange for profiling a company, and our editors never own a position in any stocks they talk about.]
Related Posts
Alan Knuckman
Alan Knuckman brings two decades of commodity trading experience to his role as managing editor of Resource Trader Alert, a weekly newsletter providing analysis and real-time updates on current and evolving market conditions. His options, futures, and currencies experience have made him a sought after commentator on issues shaping both hard (extracted or mined) and soft (grown or produced through the agriculture industry) commodities. He is a frequent guest on major international media outlets including CNBC, Sky News, MarketWatch, Bloomberg, Fox Business Network, CNN Money, and Reuters.
Start your free Tomorrow in Review email subscription...
We Will Not Share Your Email AddressWe Value Your Privacy
ShareThis
And the BS continues unfortunately. Everyone talking their book. The only reason Ag and farm products are a buy now is because everyone (that matters) is already well positioned. They need you and I to now buy so they can get further momentum, and ultimately to hand the shares off to you.