Lean Hog/Corn Spread
We are back in the livestock and feed game! Yesterday the August-September hog/corn spread closed below the May 18th reaction low and triggered our short sale signal. The spread also made a two-day close below the rising 20-day Moving Average for the first time since late March and signaled a bearish trend change.
The blog initiated a hypothetical trade to sell one 40,000 lb. August lean hog contract and simultaneously buy one 5,000 bushel September corn contract at +$14,312.50 (premium hogs). Initially, the exit strategy is to liquidate the spread on a close above +$16,100 (premium hogs).
Recall that previous runs to +$15k or higher have usually been followed by a decline to +$1k or lower. Therefore, we will be looking for opportunities to add to the short position if the August-September hog/corn spread continues to trend lower.