11-3-15 was not down nearly as much as the model projected but it was down -0.84 to 67.24. The ZZZs are now discounted to the component by -9.47. The fact that the component did not ease as much as projected suggests to me that packers are accumulating an inventory of purchased hogs at lower prices and there is likely to be some compensatory decline in the index as these cheaper hogs find their way to the packing plants.

The six-day moving average carcass weight was exactly unchanged at 213.7#. That is only -2.06 below the same date last year. Packer hogs continue to come to market about 3.5# heavier than the non-packer hogs. In June 2014 packer hogs were running about a pound under non-packer hogs. There is a good chance that packers responded to the tight hog supply in 2014 by significant expansion. They now have the hogs and they are bringing them to slaughter at heavier weights than the non-packer hogs. This may not be suggesting that there is a glut of hogs, but there seems to be ample numbers of heavier hogs that can be brought to market if demand warrant.

And there is an ample supply of market ready hogs even if demand is not clammering for more pork.

This morning I loaded my boat with another long Q/V spread at 8.70. On average over the past twelve years it has gone to cash settlement at 11.06. Only four times during this period did it go to cash settlement significantly below my entry. In 2007 it did go to cash settlement at 4.20 so there is plenty of risk here. There is also plenty of reward because it went to cash settlement above 19 in both 2011 and 2014.

Best wishes,

dhm