Hogs Go Haywire as October Pig Premium Surges 37% in Two Days

  • U.S. grocers seen stocking up for National Pork Month specials
  • Sure bet? Price fell in December 12 out of 14 times since '01

Traders are betting that U.S. grocers will gear up to sell more bacon, roasts and chops for a national pork promotion next month, boosting demand and driving the premium for October hog futures up 37 percent in two days against the December price.

Following National Pork Month in October, hog prices probably will drop amid a seasonal peak in supplies, said Rich Nelson, the chief market strategist at Allendale Inc. in McHenry, Illinois. Since 2001, prices in the month of December have dropped 12 out of 14 times.

The divergence in the outlook left the premium for October hog futures in Chicago over the December price almost quadrupling since the end of June.

“People want to be long, but don’t feel there’s much left in the upside in futures by themselves,” Nelson said Tuesday in a telephone interview. “It’s a way of going bullish without getting caught by a long futures position in October.”

On Wednesday, the October premium to December futures rose 13 percent to 6.25 cents a pound at 3:41 p.m. on the Chicago Board of Trade after jumping 21 percent on Tuesday. On June 29, the spread closed at 1.6 cents.

Hog futures for December settlement fell 2.8 percent to close at 62.075 cents a pound on Wednesday. The contract has the highest open interest. The October price dropped 1.6 percent to 68.25 cents.

In December 2014, the most-active futures contract dropped 8 percent. In 14 years, the price posted gains only in 2001 and 2010.

Wholesale pork on Wednesday fell 0.4 percent to 83.64 cents a pound, the lowest since July 20, government data showed.

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