7/28/16 was down BIG TIME -1.25 to 73.09. Packers are going to work getting their cost of product down. The QQQs are now discounted to the component by -4.09. Traders are thinking more cuts are on the way and if cutouts don't stabilize, they may be right.

In addition to the daily calculation of the component, I also calculate what I think is the packers' national average cost of carcasses. It usually runs fairly close to the CME Lean Hog Index. But today it is quite a bit higher at 76.32. I believe this says that packers have some longer-term purchase agreements in place that are currently higher than the market and they are bound by these agreements. And I wonder, "Will this cause packers to cut prices where they can which is the index hogs?"

If so, this may not be good news for index hog producers.

The 6-day moving average carcass weight eased to 208.29#. That ais -1.98# year/year. It appears that producers are moving hogs to market at a rapid clip and are staying very current in their shipments. Packers are especially moving hogs out fast. Their hogs have now dropped in weight to the point that they are under the non-packer hogs by -0.29#. Those boys know what they are doing!

Index hogs are also lighter at 207.4#.

I'm short the VVVs today after having put a little money in the bank on some short QQQs yesterday,

Best wishes,

dhm