7/22/16 was down -0.61 to 76.15. The QQQs are now trading discount to the component by -1.13. Traders are thinking that packers are going to cut their bids still more.

That just might happen.

At any rate, packers have been running their hogs to market at a rapid clip. The 6-day moving average carcass weight of packer hogs is only +0.02# heavier than non-packer hogs. Back in mid-April they were close to four pounds heavier. It appears that packers are now very current in killing their hogs. And why would they be getting current?

1. Either because they cannot find non-packer hogs to fill their needs or

2. Because they think the price is heading down and they want to market their hogs at the higher price.

I'm thinking perhaps it is the latter but I may be reading things all wrong. The declining carcass weights could be a reflection of slow growth during hog weather. However the fact remains that the kill for the past two weeks has been higher than projected from the last H&P report so the numbers seem to be in producers' barns. If the hot weather IS slowing growth, it is possible that when the weather cools and fresh corn begins to flow, there will be some compensatory growth take place and a significant increase in the kill rate could take place. Lately the H&P reports have been quite good and the low kill rate during June and early July may have merely been some mis-placement of hogs in the weight categories by the USDA and the numbers were actually there. Now we are seeing a bulge in the kill representing the mis-placements in the weight categories hitting the market.

The fact that the six-day moving average carcass weight is -1.48# year/year suggests to me that producers are keeping current in their shipments and also that the impact of larger kill numbers will not be as burdensome as it would be if the carcasses were heavier.

Some spreads are working for me today and some are working against me.

Best wishes,

dhm

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IndPackers