6/25 was down -0.27 to 77.77. The NNNs settled discount to the component by -4.22.

The six-da.21y moving average carcass weight was down to 213.02#. That is +4.64# yr/yr. Index hogs were also a bit lighter at 213.02#. Packer hogs are now lighter than the non-packer hogs by -0.24#. Packers have really become much more current in their shipments but they are still shipping a higher percentage of the kill than they were one-year ago. Packers have vertically integrated to a significant degree over the past year.

Cutouts dipped another -1.61 on Wednesday. The model calculates that packers are now losing $8.11 on each Index hog they process and that is just the product margin before paying salaries, utilities, insurance, etc. etc. Even if the component drops to where the NNNs are, their gross margin will only be +0.90 per hog. If packers cannot get the cutouts up, they are going to be forced to drop the component three to five points below where the NNNs settled on Wednesday. I added to my short NNNs yesterday and held all 2020 futures. Usually I will make between four and twenty calendar spread trades a day. Yesterday I only one spread trade fill.

Best wishes,

Doc