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Market Sentiment
Buy
Based on the latest 13 weeks of non-commercial positioning data. ℹ️

Lean Hogs (Non-Commercial)

13-Wk Max 146,094 70,981 9,031 6,516 80,857
13-Wk Min 84,018 53,809 -24,458 -11,428 18,021
13-Wk Avg 105,768 61,697 -1,944 456 44,071
Report Date Long Short Change Long Change Short Net Position Rate of Change (ROC) ℹ️ Open Int.
April 29, 2025 98,526 63,669 5,477 1,916 34,857 11.38% 271,636
April 22, 2025 93,049 61,753 9,031 -4,244 31,296 73.66% 261,166
April 15, 2025 84,018 65,997 -5,022 -4,984 18,021 -0.21% 258,083
April 8, 2025 89,040 70,981 -5,902 6,516 18,059 -40.75% 273,076
April 1, 2025 94,942 64,465 4,451 3,363 30,477 3.70% 275,902
March 25, 2025 90,491 61,102 -2,311 2,892 29,389 -15.04% 268,745
March 18, 2025 92,802 58,210 -528 3,097 34,592 -9.49% 267,412
March 11, 2025 93,330 55,113 -11,627 -3,179 38,217 -18.10% 263,518
March 4, 2025 104,957 58,292 -16,679 4,483 46,665 -31.20% 287,309
February 25, 2025 121,636 53,809 -24,458 -11,428 67,827 -16.11% 296,091
February 18, 2025 146,094 65,237 9,007 1,370 80,857 10.43% 331,138
February 11, 2025 137,087 63,867 8,077 4,302 73,220 5.44% 316,264
February 4, 2025 129,010 59,565 5,214 1,830 69,445 5.12% 301,505

Net Position (13 Weeks) - Non-Commercial

Change in Long and Short Positions (13 Weeks) - Non-Commercial

COT Interpretation for LEAN HOGS

Comprehensive Guide to COT Reports for Agricultural Markets

Table of Contents

Introduction

The Commitment of Traders (COT) reports are particularly valuable for agricultural commodity markets, where a complex mix of producers, processors, speculators, and index funds creates unique market dynamics. This specialized guide focuses on applying COT analysis specifically to agricultural futures markets to gain trading and hedging advantages.

Agricultural markets present distinct characteristics in COT reports due to their seasonal production cycles, weather dependencies, global supply chain factors, and the essential nature of these commodities in the food supply chain. Understanding these nuances can provide significant analytical advantages.

Agricultural COT Reports: Key Characteristics

The CFTC provides specialized report formats that are particularly relevant for agricultural markets:

  1. Supplemental COT Report

    Created specifically for agricultural commodities to address the growing influence of index traders. This report separates index traders from the traditional commercial category, providing greater visibility into true commercial hedging versus passive long-only index investment.

  2. Disaggregated COT Report

    Particularly useful for agricultural markets as it separates:

    • Producer/Merchant/Processor/User: Actual agricultural industry participants
    • Swap Dealers: Often representing index exposure
    • Managed Money: Speculative funds and commodity trading advisors
    • Other Reportables: Other large traders
    • Non-Reportable Positions: Smaller traders
  3. Combined Futures and Options Report

    Important for agricultural markets where options strategies are frequently used by producers and processors for hedging.

Agricultural Markets Covered

The COT reports cover the following major agricultural futures markets:

Grains and Oilseeds

  • Corn (CBOT)
  • Soybeans (CBOT)
  • Wheat (CBOT, KCBT, MGEX)
  • Soybean Oil (CBOT)
  • Soybean Meal (CBOT)
  • Oats (CBOT)
  • Rough Rice (CBOT)
  • Canola (ICE)

Softs

  • Cotton (ICE)
  • Coffee (ICE)
  • Sugar (ICE)
  • Cocoa (ICE)
  • Orange Juice (ICE)

Livestock

  • Live Cattle (CME)
  • Feeder Cattle (CME)
  • Lean Hogs (CME)

Dairy

  • Class III Milk (CME)

Special Considerations for Agricultural Markets

  1. Seasonality

    Agricultural COT data must be interpreted within the context of seasonal production cycles:

    • Planting Seasons: Typically see increased hedging by producers
    • Growing Seasons: Weather concerns can drive speculative activity
    • Harvest Periods: Often see peak short hedging by producers
    • Storage Periods: Commercial positions shift from producers to processors and merchants
  2. USDA Reports Impact

    Major USDA reports cause significant position adjustments:

    • Prospective Plantings (March)
    • Acreage Report (June)
    • Crop Production Reports (Monthly)
    • WASDE Reports (Monthly)
    • Grain Stocks Reports (Quarterly)
  3. Weather Sensitivity

    Weather events can drive rapid position changes:

    • Drought conditions
    • Excessive rainfall
    • Early/late frosts
    • Global weather patterns (El Niño/La Niña)
  4. Global Production Cycles

    Unlike financial markets, agricultural markets must account for different hemispheric growing seasons:

    • North American harvest vs. South American harvest
    • Northern vs. Southern Hemisphere production windows

Understanding Trader Categories in Agricultural Markets

Producer/Merchant/Processor/User

Who they are: Farmers, grain elevators, food companies, feed manufacturers

Trading behavior:

  • Producers typically hedge by selling futures (short)
  • Processors typically hedge by buying futures (long)
  • Net position often reflects current point in seasonal cycle

Interpretation keys:

  • Increasing short positions ahead of harvest indicates producer hedging
  • Increasing long positions indicates processor price risk management
  • Extreme positions relative to seasonal norms may signal price turning points

Swap Dealers in Agricultural Markets

Who they are: Banks and dealers who provide commodity index exposure to clients

Trading behavior:

  • Predominantly long-biased due to index composition
  • Position changes often reflect fund flows rather than price views
  • Less responsive to short-term price movements

Interpretation keys:

  • Significant position changes may reflect institutional money flows
  • Generally less predictive for short-term price movements
  • Important for understanding overall market structure

Managed Money in Agricultural Markets

Who they are: Commodity Trading Advisors (CTAs), hedge funds, commodity pools

Trading behavior:

  • Typically trend-following
  • Responsive to technical signals and fundamental data
  • More volatile position changes than other categories

Interpretation keys:

  • Extreme positions often signal potential market turning points
  • Rapid position changes may precede significant price movements
  • Divergences between positions and price can be powerful signals

Seasonal Patterns in Agricultural COT Data

Corn

  • January-March: Processors often increase long positions
  • April-June: Producer short hedging increases with planting progress
  • July-August: Weather markets drive speculative positioning
  • September-November: Peak producer short hedging during harvest
  • December: Year-end position squaring

Soybeans

  • February-April: South American harvest impacts positioning
  • May-July: U.S. growing season uncertainty drives speculative activity
  • August-October: Producer hedging increases ahead of U.S. harvest
  • November-January: Processor buying often increases post-harvest

Wheat

  • March-May: Winter wheat condition reports impact positioning
  • June-August: Northern Hemisphere harvest creates heavy commercial short positioning
  • September-October: Planting intentions for new crop influence positions
  • November-February: Southern Hemisphere harvest impacts

Cotton

  • February-April: Planting intentions drive positioning
  • May-July: Growing season uncertainties
  • August-October: Harvest hedging peaks
  • November-January: Mill buying often increases

Live Cattle

Demonstrates less pronounced seasonality than crops

  • Feedlot placement cycles influence commercial hedging patterns
  • Seasonal demand patterns (grilling season, holidays) affect processor hedging

Index Fund Impact on Agricultural Markets

Understanding Index Involvement

  • Commodity indices like the S&P GSCI and Bloomberg Commodity Index maintain significant agricultural exposure
  • Index funds maintain predominantly long positions with periodic rebalancing
  • The Supplemental COT Report specifically identifies index trader positions

Key Considerations

  • Index positions tend to be less responsive to short-term price movements
  • "Roll periods" when indices shift positions between contract months can create temporary price pressure
  • Index participation has grown significantly since early 2000s, altering traditional market dynamics

How to Use Index Data

  • Major changes in index positions may signal institutional asset allocation shifts
  • Divergences between index positioning and price can identify potential opportunities
  • Understanding index roll schedules helps anticipate potential market impacts

Case Studies: Major Agricultural Markets

Corn Market

Commercial Positioning: Typically net short, with seasonal variation

Key COT Signals:

  • Commercials reducing short positions during price declines often precedes rallies
  • Managed Money net position extremes frequently coincide with price turning points
  • Commercial vs. Managed Money position gaps widening signals potential reversals

Soybean Market

Commercial Positioning: Varies greatly with global supply dynamics

Key COT Signals:

  • South American harvest periods create unique positioning patterns
  • Processor long positions increasing can signal anticipated demand strength
  • Spread positions between soybeans and products (meal, oil) provide crush margin insights

Live Cattle Market

Commercial Positioning: Processors often net short, feedlots net long

Key COT Signals:

  • Pack
  • Packer short coverage often precedes price rallies
  • Extreme speculative long positions frequently signal potential tops
  • Divergences between feeder and live cattle positioning provide spread opportunities

Trading Strategies for Agricultural Markets

  1. Harvest Pressure Strategy

    Setup: Monitor producer short hedging building before/during harvest

    Entry: Look for commercial short position peaks coinciding with price lows

    Exit: When commercial shorts begin covering and prices stabilize

    Markets: Particularly effective in grains and cotton

  2. Weather Premium Fade

    Setup: Identify extreme speculative positions during weather scares

    Entry: When managed money reaches historical position extremes

    Exit: As weather concerns normalize and positions revert

    Markets: Particularly effective in growing-season grain markets

  3. Commercial Signal Strategy

    Setup: Track commercial position changes relative to price

    Entry: When commercials significantly reduce net short positions during price declines

    Exit: When commercials begin increasing short positions again as prices rise

    Markets: Works across most agricultural commodities

  4. Processor Demand Strategy

    Setup: Monitor processor long positions for signs of anticipated demand

    Entry: When processor longs increase significantly during price weakness

    Exit: When prices rise to reflect the improved demand outlook

    Markets: Particularly effective in processing crops like soybeans, cotton, and cattle

  5. Commercial/Speculator Divergence Strategy

    Setup: Identify growing gaps between commercial and speculative positioning

    Entry: When the gap reaches historical extremes

    Exit: When the gap begins to narrow and price confirms

    Markets: Applicable across all agricultural markets

Combining COT Data with Fundamental Analysis

USDA Reports

  • Compare COT positioning changes before and after major USDA reports
  • Look for confirmation or divergence between report data and position adjustments
  • Monitor commercial reaction to reports for insight into industry interpretation

Crop Progress and Condition

  • Weekly crop condition reports often drive speculative positioning
  • Commercial reaction to condition changes can provide valuable trading signals
  • Divergences between conditions and positioning may identify mispriced markets

Global Supply and Demand Factors

  • International crop production changes drive positioning in globally traded markets
  • Export sales reports influence commercial hedging activities
  • Currency movements impact relative positioning in internationally traded commodities

Integrating Seasonal Fundamentals

  • Compare current positioning to historical seasonal patterns
  • Identify when positions are abnormal for the current point in the season
  • Use seasonal tendencies to anticipate upcoming position changes

Common Pitfalls and How to Avoid Them

  1. Ignoring Seasonality

    Pitfall: Interpreting position levels without seasonal context

    Solution: Always compare current positions to historical seasonal norms

    Example: Producer short positions naturally increase during harvest, not necessarily bearish

  2. Overlooking Contract Roll Impacts

    Pitfall: Misinterpreting position changes during index roll periods

    Solution: Be aware of standard roll schedules for major indices

    Example: Apparent commercial selling during roll periods may be temporary technical flows

  3. Misunderstanding Report Categories

    Pitfall: Not recognizing the nuances between different COT report formats

    Solution: Use the Supplemental and Disaggregated reports for better clarity

    Example: Index fund positions in Legacy reports can distort true commercial hedger activity

  4. Reacting to Single-Week Changes

    Pitfall: Overemphasizing one week's position changes

    Solution: Focus on multi-week trends and significant position changes

    Example: Weather-driven temporary position adjustments vs. fundamental trend changes

  5. Neglecting Spread Positions

    Pitfall: Focusing only on outright positions, missing spread implications

    Solution: Monitor spreading activity, especially in related markets

    Example: Soybean/corn spread positions can provide insight into acreage competition

Resources for Agricultural COT Analysis

Specialized Data Services

  • AgResource Company: Provides COT analysis specific to agricultural markets
  • Hightower Report: Offers regular COT commentary for agricultural commodities
  • Brugler Marketing: Features agricultural-focused COT interpretation

Software Tools

  • Commodity Research Bureau (CRB): Offers historical COT data visualization for agricultural markets
  • DTN ProphetX: Includes agricultural COT analysis tools
  • AgriCharts: Provides specialized agricultural market data including COT information

Educational Resources

  • Agricultural Extension Services: Many offer educational materials on hedging and market analysis
  • CME Group: Provides educational content specific to agricultural markets
  • ICE Exchange: Offers resources for soft commodity trading and analysis

Government Resources

  • USDA ERS (Economic Research Service): Provides contextual market analysis
  • CFTC Agricultural Advisory Committee: Publishes recommendations and analysis
  • USDA AMS (Agricultural Marketing Service): Offers complementary market data

© 2025 - This guide is for educational purposes only and does not constitute financial advice. Agricultural markets involve significant risk, and positions should be managed according to individual risk tolerance and objectives.

Market Buy
Based on the latest 13 weeks of non-commercial positioning data.
📊 COT Sentiment Analysis Guide

This guide helps traders understand how to interpret Commitments of Traders (COT) reports to generate potential Buy, Sell, or Neutral signals using market positioning data.

🧠 How It Works
  • Recent Trend Detection: Tracks net position and rate of change (ROC) over the last 13 weeks.
  • Overbought/Oversold Check: Compares current net positions to a 1-year range using percentiles.
  • Strength Confirmation: Validates if long or short positions are dominant enough for a signal.
✅ Signal Criteria
Condition Signal
Net ↑ for 13+ weeks AND ROC ↑ for 13+ weeks AND strong long dominance Buy
Net ↓ for 13+ weeks AND ROC ↓ for 13+ weeks AND strong short dominance Sell
Net in top 20% of 1-year range AND net uptrend ≥ 3 Neutral (Overbought)
Net in bottom 20% of 1-year range AND net downtrend ≥ 3 Neutral (Oversold)
None of the above conditions met Neutral
🧭 Trader Tips
  • Trend traders: Follow Buy/Sell signals when all trend and strength conditions align.
  • Contrarian traders: Use Neutral (Overbought/Oversold) flags to anticipate reversals.
  • Swing traders: Use sentiment as a filter to increase trade confidence.
Example:
Net positions rising, strong long dominance, in top 20% of historical range.
Result: Neutral (Overbought) — uptrend may be too crowded.
  • COT data is delayed (released on Friday, based on Tuesday's positions) - it's not real-time.
  • Combine with price action, FVG, liquidity, or technical indicators for best results.
  • Use percentile filters to avoid buying at extreme highs or selling at extreme lows.

Okay, let's craft a comprehensive COT report-based trading strategy for Lean Hogs, tailored for retail traders and market investors. This will be a multi-faceted strategy, focusing on analyzing the Commitments of Traders (COT) report and integrating it with other technical and fundamental factors.

Disclaimer: Trading futures contracts involves substantial risk of loss and is not suitable for all investors. The following strategy is for educational purposes only and should not be considered investment advice. Always conduct thorough research and consult with a qualified financial advisor before making any trading decisions.

I. Understanding the COT Report for Lean Hogs

  • What is the COT Report? The Commitments of Traders (COT) report is published weekly by the Commodity Futures Trading Commission (CFTC). It breaks down the open interest in futures contracts by different categories of traders. For Lean Hogs, we're primarily interested in:

    • Commercials (Hedgers): These are companies involved in the production, processing, or marketing of hogs (e.g., packers, producers). They use futures to hedge their price risk. They are considered the "smart money".
    • Non-Commercials (Large Speculators): These are typically institutional investors, hedge funds, and other large trading entities. They are trading for profit and are considered momentum traders.
    • Non-Reportable Positions (Small Speculators): These are smaller traders whose positions are too small to be reported individually. Retail traders often fall into this category.

  • Where to Find the COT Report: The CFTC website (cftc.gov) is the official source. You can download the "Legacy" or "Disaggregated" reports. For Lean Hogs, most traders focus on the "Disaggregated" report, which provides more granularity. Many charting platforms and financial websites also offer COT data, often visualized in charts.

  • Key COT Data Points:

    • Net Position: The difference between long and short positions for each category. This is the most important metric. A positive net position means the group is net long, and a negative net position means they are net short.
    • Changes in Net Position: The change in the net position from the previous week. This indicates the direction of trading activity.
    • Open Interest: The total number of outstanding futures contracts. Rising open interest with rising prices can confirm an uptrend, while rising open interest with falling prices can confirm a downtrend.

II. The Trading Strategy: Combining COT with Technical and Fundamental Analysis

This strategy combines COT data with technical analysis and fundamental factors to identify potential trading opportunities.

A. Core COT-Based Principles:

  1. Follow the Commercials (Hedgers): This is the cornerstone of many COT-based strategies. The underlying assumption is that commercial traders, with their deep understanding of the hog market, are typically on the right side of the trend in the long run. Look for:

    • Commercials Building a Large Net Long Position: This could indicate that they believe prices are going to rise (or are undervalued), and they are hedging against future price increases. This is a bullish signal.
    • Commercials Building a Large Net Short Position: This could indicate that they believe prices are going to fall (or are overvalued), and they are hedging against future price decreases. This is a bearish signal.
    • Divergences: Pay attention to divergences between the price of Lean Hogs and the commercials' net position. For example, if prices are rising, but the commercials are starting to decrease their net long position (or increase their net short position), this could be a warning sign that the uptrend is weakening.

  2. Observe Non-Commercial (Large Speculator) Behavior:

    • Confirmation or Contradiction: Do the large speculators agree with the commercials? If both are net long and increasing their positions, it reinforces the bullish signal. If they are moving in opposite directions, it suggests a potential conflict in market opinion.
    • Extreme Positions: When large speculators reach extreme net long or net short positions, it can indicate overbought or oversold conditions and a potential for a reversal. These extremes need to be considered in context of price action and market conditions.

  3. COT Extremes:

    • Identify historical extremes in net positioning for commercials and large speculators. For example, look at the highest and lowest net long positions held by commercials over the past few years. When current positioning approaches these extremes, it can suggest a potential turning point in the market.

B. Technical Analysis Integration:

  1. Trend Identification: Determine the overall trend of Lean Hogs using techniques like moving averages (e.g., 50-day, 200-day), trendlines, and chart patterns (e.g., head and shoulders, double tops/bottoms).
  2. Support and Resistance: Identify key support and resistance levels on the price chart. These levels can act as potential entry or exit points.
  3. Momentum Indicators: Use momentum indicators like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD) to gauge the strength and direction of price movements. Look for overbought/oversold conditions and divergences.
  4. Volume Analysis: Analyze trading volume to confirm price movements. For example, a breakout above resistance should be accompanied by a significant increase in volume.
  5. Candlestick Patterns: Utilize candlestick patterns to identify potential reversals or continuations of trends.

C. Fundamental Analysis Integration:

  1. Hog Supply and Demand: This is crucial for Lean Hogs. Consider:

    • Hog Inventory Reports: The USDA releases regular reports on hog inventories, farrowing intentions, and pig crops. These reports provide insights into the current and future supply of hogs.
    • Pork Demand: Track domestic and export demand for pork. Factors influencing demand include consumer preferences, economic conditions, and trade agreements.
    • Feed Costs: The cost of corn and soybean meal, the primary feed ingredients for hogs, significantly impacts profitability for producers. Rising feed costs can reduce hog production.

  2. Seasonality: Lean Hog prices tend to exhibit seasonal patterns. For example, prices often rally in the spring due to increased grilling demand. Factor these seasonal tendencies into your trading decisions.

  3. Disease Outbreaks: Outbreaks of diseases like African Swine Fever (ASF) can severely disrupt hog supplies and significantly impact prices. Stay informed about potential disease risks.

  4. Government Regulations: Changes in government regulations, such as environmental regulations or trade policies, can affect the hog market.

  5. Weather: Extreme weather events can disrupt hog production and transportation.

III. Trading Rules and Risk Management

  1. Entry Signals:

    • COT Confirmation: A strong signal is when the commercials are building a large net long (or short) position, and the technical analysis confirms the potential for a price move in the same direction.
    • Support/Resistance Breakout: Enter a long position when the price breaks above a key resistance level, confirmed by volume and COT data supporting the move. Enter a short position when the price breaks below a key support level, confirmed by volume and COT data.
    • Momentum Confirmation: Enter a long position when the MACD crosses above the signal line or when the RSI moves above 50, accompanied by supportive COT data.

  2. Exit Signals:

    • Target Price: Set a target price based on technical analysis (e.g., the next resistance level) or fundamental analysis (e.g., a price level where hogs are considered overvalued).
    • Stop-Loss Order: Place a stop-loss order below a recent swing low (for long positions) or above a recent swing high (for short positions) to limit potential losses.
    • COT Divergence: Exit a position if the commercials start to reverse their positions, indicating a potential change in market sentiment.
    • Time Stop: Consider exiting a position after a specific time frame if the price fails to move in the expected direction.

  3. Risk Management:

    • Position Sizing: Never risk more than a small percentage (e.g., 1-2%) of your trading capital on any single trade.
    • Stop-Loss Orders: Always use stop-loss orders to limit potential losses.
    • Diversification: Don't put all your eggs in one basket. Diversify your trading portfolio across different markets and asset classes.
    • Leverage: Be cautious with leverage. Futures contracts offer significant leverage, which can magnify both profits and losses.
    • Psychology: Manage your emotions. Don't let fear or greed influence your trading decisions. Stick to your trading plan.

IV. Example Trade Scenario (Bullish)

  1. COT Signal: The Commercials have been steadily increasing their net long position in Lean Hogs futures for the past several weeks. Their net long position is now approaching a historically high level.
  2. Technical Analysis: The price of Lean Hogs has broken above a key resistance level (confirmed by increasing volume) and is trending upward. The MACD is above the signal line, indicating positive momentum.
  3. Fundamental Analysis: Hog inventory reports suggest that hog supplies are tightening due to [insert specific reason, e.g., disease outbreak, reduced farrowing intentions]. Pork demand is expected to increase due to the upcoming grilling season.
  4. Trade Setup:
    • Entry: Enter a long position at the current market price or on a pullback to a support level.
    • Stop-Loss: Place a stop-loss order below the recent swing low.
    • Target Price: Set a target price at the next resistance level or based on fundamental analysis.
  5. Monitoring: Continuously monitor the COT report, price action, and fundamental data. Adjust your stop-loss order as the price moves in your favor. Exit the position if the commercials start to decrease their net long position or if the fundamental outlook changes.

V. Backtesting and Adjustments

  • Backtesting: Before trading this strategy with real money, backtest it using historical data to assess its profitability and risk.
  • Paper Trading: Practice trading the strategy on a demo account to get comfortable with the execution and management of trades.
  • Continuous Improvement: Continuously analyze your trading results and adjust the strategy as needed. The market is constantly evolving, so your trading strategy should adapt to changing conditions.

VI. Key Considerations for Retail Traders:

  • Data Availability: Ensure you have access to reliable COT data and technical analysis tools.
  • Time Commitment: COT analysis and fundamental research require time and effort. Be prepared to dedicate the necessary time to properly analyze the market.
  • Capital Requirements: Futures trading requires a significant amount of capital. Start with a small account and gradually increase your position sizes as you gain experience and confidence.
  • Education: Continuously educate yourself about the Lean Hogs market, COT analysis, technical analysis, and risk management.

By combining a deep understanding of the COT report with technical analysis and fundamental factors, retail traders and market investors can develop a more informed and potentially profitable trading strategy for Lean Hogs futures. Remember to always prioritize risk management and continuously adapt your strategy to changing market conditions. Good luck!