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Advisor

convergence in lean hogs

Been long LHM for a while with decent results.

 

Looks like yesterday's top base bids were around 74 and June futures around 82. Cash is rallying but has a ways to catch up as we hit delivery.

 

I don't really know this game any more. Is there a functioning delivery mechanism, and if there is, does it tend to imply some or all of the quality premiums that most producers probably get beyond the cash bid? What you estimate that to be, on average?

 

Thanks in advance for any thoughts.

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2 Replies
Honored Advisor

Re: convergence in lean hogs

It`s only a tiny (maybe 2%) of hogs sold in the open market, I would guess the premium is $8 over the quoted cash bids, but varies.  It`s kind of like the "greasy wool" market   Smiley Happy

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Senior Contributor

Re: convergence in lean hogs

The market has been cash settled since about 1996. I was a lone voice fighting it back then.
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