10/16/14 plunged by -1.11 to 107.67. With the weakness in the ZZZs, they are still discounted to the CME Index by 17.79. Traders are really planning on the Index falling out of bed over the next eight weeks.

And it might happen.

The dynamics seek to be right for an unusually volatile "Tug-O-War" going on between the bulls and the bears over the coming weeks. My bias is that the entire "Gap" between the ZZZs and the CME Index will be closed by the Index collapsing but I'm not betting the farm on it! In fact the only thing I have working in the ZZZs is a few short Z/G spreads and a couple of long 90/92 bear put spreads.

The six-day moving average carcass weight has moved up to 214.34# and the packer hogs once again gained more than the non-packer hogs. I'm suspecting packers have some empty pens and are finishing to heavier weights to take advantage of the cheap corn to put on weight. Fresh corn and cool weather are the right ingredients for hogs to finish in a hurry.

In two weeks cut outs have plunged by 13.44. That's enough to make packers a little cranky and they took it out on the producers by cutting their bids according to the afternoon reports on Friday. Unless they were bidding more aggressively in the afternoon, we are going to see the component on Friday's kill drop close to another buck.

Even though packers were pulling back on the money they were offering for hogs, producers seemed to be fairly willing sellers and packers had rounded up quite a few more hogs by the time the afternoon reports came out than usual.

By the time the last hog is killed on Saturday, it looks like the kill for the week will be down 4.5% from the same week last year. That is a lower number than I was expecting from the H&P report. I was thinking something like -3.5%. Heavier weights will close some of the gap in pork production, though. The USDA is projecting that pork production for the week will only be down 2.6% but up 2.5% from the previous week. That may be enough product to keep packers hustling to get it all peddled.

I was at the grocery store and the local store was offer boneless pork loin chops at "Buy One Get One Free". Not a very big sample but not suggesting robust demand.

The number of hogs scheduled for delivery yesterday was down 40K from the previous week. The good sized purchase packers made on Friday should close that gap just fine.

I hope you have a great weekend and will come back Monday morning fresh to tackle the hog market.

Best wishes,

dhm