3/17/15 was down -$0.73. That is the largest one-day drop we have seen for a couple of weeks or more. My Hog Pricing Model projects that the CME Lean Hog Index component on the 3-17-15 kill will fall back between -0.45 and -0.75. The combination of high kill numbers and lower trending cutout prices is greatly limiting what packers can/will pay for hogs.

Packers made only a fair purchase yesterday at 87.4% of the moving average purchases. It does not appear that they didn't really need to make a big purchase because the swine scheduled for delivery report yesterday showed that the had 16.18% more hogs scheduled yesterday than they had on the same date last year.

Producers seem to be willing shippers of hogs and they are getting quite current in their shipments. The six-day moving average carcass weight yesterday eased to 214.38#. That is only +0.15# yr/yr. The movement of a bunch of heavies to get current has added to the kill rate. I'm not sure how much but dropping more than 3.0# probably represents 1.5 to 2.0 days of kill or about 600,000 hogs.

Since 2/1/15 the kill has been 6.8% higher than one year ago. Perhaps half of this increase is from the liquidation of heavies and the rest represent expansion. With exports being negatively impacted by the high dollar and the dock workers labor dispute, domestic consumers are having to step up and carry off this higher production which they are willing to do but they want to do so at a lower price.

Looking at packers margins, I think there is a good chance that packers are in a sour mood and will continue to work to fix their margin problem.

You and I both know how they fix their margin problem in an environment where they are having trouble peddling all the product so I am continuing to have a bearish bias to my spread trades.

Best wishes,

dhm