Sort & Cull

I suppose you could still argue that the uneven music sputtering from the lean hog pit sounds like a bullish polka. After all, summer contracts continue to skip $7 to $10 over the spot cash index. Such a substantial premium structure is hardly suggestive of a dirge.

Nevertheless, the back-and-forth wheezing of June, July, and August in recent weeks reminds me of a broken accordion -- an old, unreliable squeeze box that has gone out of tune thanks to excess merry-making and spilled beer.

My problem with the recent performance is typically fickle, a common complaint from those of us who spend far too many hours of the day with eyes glued to the CME screen: "What have you done for me lately?"

I can't stop thinking about the explosive and exciting noise these contracts rocked from late February to mid-March. Those were the days when PEDv panic caused buyers to relentlessly swamp the lean pit with all the calm of Brazilian soccer fans.

When the PEDv narrative was relatively new to market ears it had a hot ring of destructive uncertainty. And the sizzle of the story was significantly underscored by actual slaughter data over multiple weeks that shocked analysts by totaling 6%-7% below the previous year.

Combining talk of a deadly swine virus that feared no vaccine with surprising hard evidence of production shortfalls was like turning a garden hose on a grease fire. In case you've forgotten, the incredible late-winter window framed a June rally of more than 2,200 points (i.e., roughly $111 to $133).

Admittedly, a tough act to follow.

As we move toward the late spring and early summer period -- a market stretch that often fosters the highest live and carcass prices in a given year -- the June contract is struggling to hold above $120 (i.e., $13 below the high of March 18).

With sincere apologies to producers who continue to fight this horrible disease, it would appear that PEDv has lost its stinger, at least in terms of immediate market impact. A big part of the reason this story has grown long in the tooth is the well-anticipated nature of recent chain speed.

For example, federally inspected hog slaughter this week totaled 2,016,000 head, "just" 3.3% below 2013. Once again, the pace of slaughter this spring fits nicely with the March 1 Hogs & Pigs report, an assessment that was initially mocked for being too insensitive to the real destructive consequences of PEDv.

If lean hog futures have a chance of regaining a significant amount of bullish psychology in the second and third quarters, longs must be given the opportunity once to point at sharply reduced kill levels, large production whole that can only be explained in terms of the disease that ran havoc several months ran.

Assuming that the worse of PEDv hit the winter pig crop, maybe market bulls simply lack logical patience. Pigs born in the Dec-Feb period do not reach market maturity until the following summer. So there's still plenty of time for the trade to find ugly evidence of PEDv death loss.

Well, at least a little time.

(AG)

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