7/17/14 was down $0.68 and the model projects that the component on yesterday's kill will shed between -0.05 and -0.35. Packers still have quite a few hogs purchased at higher prices that will probably support the index for a day or so but "Lower" was the direction established yesterday.
The weakness of the QQQs dropped them -6.21 below the Index this morning. I think that is too much so I bought again this morning at 127.975. I may be loading my boat with the wrong kind of QQQs.
The kill for the past few weeks has fallen somewhat below what the last H&P report implied it should be. There are two scenarios that might explain this lower than expected kill rate:
1. The USDA may have missed on their projection of hog numbers and there are fewer hogs than reported or
2. Producers are retaining hogs to put on more weight with feeding margins being favorable now that corn and meal prices have fallen. If this is the case, there are going to be a bunch of heavy hogs coming to market in the very near future.
Carcass weights are holding up very well for this time of the year, so producers may be reluctant shippers of hog right now. The reports this morning showed that packers were only able to purchase 69.6% of the moving average number of hogs yesterday. Seldom does it drop below 80.0%. If producers were balking at packers lower bids, they might live to regret it.
I just got a chance to scalp out of the QQQs I bought this morning at 127.975, so I took a quick trip to the bank. I have plenty more (maybe too many more) QQQs I can sell if the price rallies so I decided not to stick my neck out too much further.
Best wishes,
dhm