You are here

Goebel: Hog forward contracts see higher interest in May vs. June

Today, the April contract is expiring, why do some of the forward contracts switch right to pricing off of the June contract?

We have the problem with lack of open interest in the new contract compared to the June contract. Typically we see a lot of open interest going from the front contract to the next. Many of the contracts were rolled directly to June which has five times the open interest of the May contract. New contracts have a hard time because of trader traditions and many not willing to risk not getting good purchases of sales of the new contracts. It would take a event to get more use of the may contract.

As a hedger, we can see it is $9 higher than the April contract expiring today so the market is banking on a strong cash market rally that occurs seasonally this time of year. If cash does not gain fast enough expect some weakening of the May contract.

Today, the April contract is expiring, why do some of the forward contracts switch right to pricing off of the June contract?

Read more about