A Sweet Surprise
It’s week 6! Just when I felt happy because my misery in trading is coming to an end, I got a very pleasant surprise. Yep, what else is better than seeing my portfolio gaining a 14.96% return! Highest return I’ve ever got so far! Figure 1 shows my current portfolio as of Oct 25th and figure 2 shows my final portfolio over the course of 6 weeks trading.
Figure 1. Potfolio Summary
Figure 2. Final Portfolio
So, what exactly happened?
As all you know (if you follow my weekly blog posts), I’ve been holding living cattle contracts for a good 5-6 weeks now. The price of living cattle went high the first week after I bought the contract but remained constant after. However, yesterday the price of living cattle suddenly reach 5.9%, highest in 5-6 week period. Looking back at its price history, I’m pretty sure it will go down again back to the constant price I’ve been seeing for the last 5 weeks. So, I decided to go short on further month (Feb’ 14) contract, expecting the price will go down and it does, eventhough it’s not as much as I expected. However, I still gained a bit from that as you can see in Figure 1.
The wall street journal reported that US Live cattle futures went high hitting record price due to tight supplies due to prolonged drought in US Great Plains. My speculation that the price of live cattle won’t go any higher is also supported by the article. It said that higher beef prices will eventually face resistance from consumer. Since beef and pork or chicken is substitute, consumers have started to switch to pork and chicken which are currently cheaper.
As I stated before since beef price soars high (giving me lots of profit), consumers start to switch to its substitute, which is pork and chicken driving hog price high too due to the high demand. In addition to that, there has been a reduction in pork slaughter due to Porcine Epidemic Diarrhea (PED) virus found in US lean hogs. It is a virus that causes acute and severe diarrhea in all ages of pigs (Ken Scwhartz and Roger Main, 2013). This series of events have helped to drive up the futures price of hog. Fortunately, it also happens that I’ve been holding lean hog futures contract. Both livestock contracts have gave me quite a high return in only a day period! A good day indeed, worthy of celebration (*cheers*).
Nothing quite exciting happens in grain market. Corn price trends downward as there is an expectation of high harvest in US. It is said to be the largest on record. Wheat price is still strong due to crop losses in Argentina driving the demand from US, third largest wheat producer and exporter (Investing.com)
What’s up in the next few weeks?
USDA Crop report on Nov 8! This might be a game changer as USDA decided not to release October report after the 16-day government shutdown. Be on the look out people! =)
Enjoy the weekends fellas! =)
Cheers
