Sort & Cull

W.C. Fields always warned against working with animals and children. The old crusty comic, who once said, "If you can't dazzle them with brilliance, baffle them with bull," knew all too well the serious danger of being upstaged by more endearing and memorable forces.

Along the same lines, the legendary souse urged would-be stars to avoid following tough acts as religiously as passing on tap water ("I never drink water because of the disgusting things fish do in it.") Once he found himself scheduled to follow the riotous Marx Brothers.

"They sang, danced, played harp and kidded in zany style. Never saw so much nepotism or such hilarious laughter in one act in my life. The only act I could never follow ... I told the manager I broke my wrist and quit."

I've been thinking about Fields' wary wisdom this week as lean hog futures staged a long overdue bounce following the release of the March 1 hogs and pigs report. Buying interest has suddenly resurfaced despite the fact official government numbers essentially confirmed the trade's bearish supply assumptions vis-a-vis 2014.

As counterintuitive as it sounds, sometimes markets hate nothing more than hard evidence supporting long-held biases. All news, no matter how extreme in one way or the other, eventually gets old, drained of its potency to shock and drive market prices.

Yet I wonder if there's more going on here than simply moldy supply assumptions that have lost their sting. Could it be that specs and commercials are hearing the cautionary drawl of W.C. concerning the necessity to follow the right act? Could it be that traders are feeling better about price potential by comparing fundamentals to 2013 rather than the extraordinary year of 2014?

For example, while the winter pig crop (i.e., 28.758 million head) was estimated to be as much as 9% greater than the previous year, it surpassed the output of Dec 2012/Feb 2013 by only 2%. If you assume that carcass weights this summer will average 5 to 6 pounds heavier than 2013, commercial pork production should total close to 5.59 billion pounds, 8% greater than Jun-Aug 2014, but only 4% greater than 2013.

Although no one will forget the bullish fireworks of last summer when Iowa dressed butchers averaged $116.50, the Jun-Aug cash trade was no shrinking violet, posting a three-month average of $97.58.

As of the close of trade Thursday, lean hog futures imply that the summer cash market ahead will average no higher than $75-$77, 23% below the same market period of 2013. I suppose some of this excess can be explained in terms of smaller exports and larger imports versus two years ago. But even a 1.9-pound increase in per capita supplies doesn't seem to justify a $20-plus break in summer prices.

Maybe the early spring board is starting to see the same light, throwing out the oddball year of 2014 (i.e., fraught with the explosive emotionalism surrounding PED) like Fields wisely distanced himself from the Marx Brothers.

For more of John's commentary, visit http://feelofthemarket.com/…

(AG)

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