7/24/14 was down $0.64 and the model projects that the CME Index component on the 7/24/14 kill will be down between -0.50 and -0.80.

The softness in the HEQ4 puts its discount to the CME Index at 7.32. Over the last ten-years the CME Index has gained 0.79 from this date to the expiration of the QQQs. But there tends to be a lot of volitility in the Index this time of the year. For instance, from this date to the expiration of the QQQs in 2011 the Index tacked on 8.67. On the other end of the scale, it coughed up 10.58 in 2009.

The question, of course, is what is the Index going to do this year?

One can never know what the future holds but it seems quite obvious that the PED virus did kill large numbers of piglets and we know that all of the hogs that will be marketed by 8/14/14 are already in producers barns and the are nearly ready to be shipped. If the last H&P report was fairly accurage, then there is a fairly high probability that producers have fallen out of currency in their shipments and may have as many as 288K of heavy hogs waiting to be shipped.

The kill this week is coming in a bit higher than projected from the last H&P report. Perhaps some of these heavies are now making their way to market. Perhaps producers are becoming more motivated sellers as the Index shows a little weakness. If there are a few extra heavy hogs to be shipped, there is still plenty of time to get them liquidated and have packers back in the mode of searching for hogs prior to the QQQs going to cash settlement.

The discount of the QQQs to the index is large enough to cause me to have some long QQQs in my account because the Index generally shows a little strength this time of the year.

Best wishes,

dhm