4-16-15 was UP +$0.58 and the model projects that CME Lean Hog Index component for the 4-16-15 kill will be up between 0.50 and 0.80. I believe packers will be a little reluctant to sweeten their bids very fast until they can bump the cut out prices up a little.

This they were not able to do yesterday.

As I watch the data, I get the impression that packers have been a bit more aggressive in this expansion phase of the hog cycle than the non-packers. I say that because the percentage of packer hogs being killed seems to be going up and the average carcass weight of packers hogs is 218.08# compared to 213.04# for non-packer hogs.

And I wonder, "What is the implication of this?"

- If we are faced with a liquidation phase of the hog cycle, will it mean that non-packers will be hit harder than packers because packers will take more off their bids since they can run their hogs through the packing plants ahead of the non-packer hogs?

- Are non-packers more nervous about the possibility that we are faced with a liquidation phase of the hog cycle so they are getting more current in their shipments than the packers?

- If we have some excess production and a bit of breeding herd liquidation, will it result in further consolidation of hog production through vertical integration by the packers?

I continue to feel that traders have bid the MMMs up a bit more than the data justifies. For the MMMs to be at a premium of +12.27 seems to be out of harmony with the historical data. On average over the past eleven years, from this date until the MMMs go to cash settlement, the CME Lean Hog Index has gained 7.40.

That doesn't mean it can gain enough to close the "Gap" because it surely can. In 2006 it went up 21.89.

It doesn't seem to me that this is a "2006" with higher production than last year, the strong dollar, weak exports and more than ample competition from chicken. To be sure, beef prices are sky high.

So -

I'm still short the MMMs both as outrights and long K/M spreads..

Best wishes,

dhm