Harrington's Sort & Cull

The Great Ghost Rally

John Harrington
By  John Harrington , DTN Livestock Analyst

Since early January, summer lean hog futures have exploded by more than $20. I'm calling it the "Great Ghost Rally of 2014." It strikes me as a good market epithet for several reasons.

On one hand, I don't believe in ghosts. Intellectually, such spooky talk is just so much supernatural nonsense. On the other hand, late-night stories of the walking dead told around the campfire once caused me to wet my bunk. To this day, I'd really rather pass on that stroll through the cemetery after dark.

I felt bad when Harold Ramis died several weeks ago. He was the writer and star of the 1984 classic "Ghostbusters." Given the way this hysterical movie makes me laugh and cringe at the same time, I just can't see it too many times.

Needless to say, there's nothing funny about the devastating disease sweeping through the U.S. pork industry known as PEDv. Yet the elusiveness of its deadly impact currently borders on the unnerving paranormal.

While anecdotal evidence has been both widespread and horrifying, it's virtually impossible for anyone at this point to produce a definitive and indisputable picture of the "ghost."

To be sure, the National Animal Health Laboratory Network (NAHLN) has been tracking PEDv cases since last summer. But even though its accounting has been alarming in terms of the growing number of confirmed cases, the expanding geography of the ugly contagion, and the accelerating pace of its growth, the data is voluntarily generated with no mechanism built in to preclude the possibility of duplication.

Perhaps even more cautionary is the hard fact that year-to-date hog slaughter continues to run very close to even with the first eight weeks of 2013. If you-know-what is set to hit the production fan, even the hottest bulls in the pasture have to admit that the blades still remain pretty clean.

While I think it's important to be honest about PEDv unknowns, sometimes market behavior can be more telling than the most stellar stats the USDA can produce (i.e., never a high bar). Accordingly, I'm very impressed by the recent spending of major packers, many of whom have no doubt seen incredible losses through the winter in their own farrowing barns.

The aggressive procurement of the last month or so has been a logical function of excellent pork demand and attractive processing margins. But my hunch is that it also stems from the recognition by big players of extremely serious pig death loss caused by PEDv.

The March 1 H&P Report will be released in three weeks (i.e., March 28), and you can bet that expectations and trade anxiety will be running higher than we've seen in years.

When the bullish market goblin is officially relieved of its speculative sheet and mask, will it be exposed as an overestimated kid playing trick-or-treat or a bona fide monster more destructive than anyone had imagined?

For more commentary from John, visit http://feelofthemarket.com/…



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Freeport IL
4/7/2014 | 4:22 PM CDT
Are you giving any odds on "Ghost Piglets" from the March hogs and pig report disappearing when slaughter time comes this summer? It seems the self serving act of "miscounting" a few dead piglets as alive by the interrogated packer might help their chance of finding a profit. This summer's slaughter numbers might find the truth but the Halloween report may have the most skeletons in the closet. Freeport, IL