July 2013 +3.21% YTD 4.50%

Dear Investor,

July +3,21% YTD +4,50%

Finally, a month that is more quiet and in which some of the spreads have worked. I see it as one battle won, but to win the war we need more. The market continues to be very volatile with rather abrupt movements. This becomes more marked in August when most of the traders are on vacation and the interns are in charge!

The problem of the lack of volume is very important. In this period of the year there are very good spreads of hogs and cattle for medium and long term, but with a messy market caused by PED in hogs on the one hand and by the use or non-use of Zilmax for cattle on the other hand. Therefore the market moves from one extreme to the other.

As you can see in the figures the spreads tend to go down from now for up to a few months. But now they can reach their maximum, take a look at the SD: the gray line in the upper part. (The blue line is the quote of the spread for this year, and the black line is the average of the past five years.)

Click to see Imagine

The market met the deviation but I still think that this spread has to work, and for this reason it is possible that in the coming weeks you might see lower numbers in the tab, but when one looks at a 4-5 month period this is what usually happens. And it is not only this one spread, there are 4 or 5 more in the same situation and all of them together can somewhat overwhelm the tab.

Another example

Cattle April/June 14 is at very much above the deviation. Alright, there are problems with Zilmax but this is going to effect the whole curve since there is a a loss of weight equally , so the seasonality will have to happen.

Click to see imagine

I believe that this is the right moment to accumulate this type of spreads, but unfortunately, for a while we will have to endure when they are a little bit against us. At any rate we have to remember that the risk is high and when a stop loss has to be executed it is executed.

At the moment there is nothing more I could tell you, only that you should enjoy what remains of the month of August, and as always, should you need anything do not hesitate to get in touch with me.

Gregory Placsintar 

Principal/Head Trader

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Greg (Author)

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