6/7/16 was up +0.65 to 79.33. That is right in line with what the model projected. It would be mighty nice if the model were as effective in projecting the price of the futures as it is in projecting the daily change in the component. But that would make things too easy. Sometimes it does work well in projecting the cash settlement price for the expiring contract when it becomes very short term. Currently the MMMs are running premium to the component by +2.77.

The six-day moving average carcass weight eased to 212.79# this morning and index hogs came in at 212.76#. It isn't that index hogs are getting heavier to close the gap between them and the non-index hogs, rather it is the other hogs are getting lighter, especially the packer hogs. As I was watching packer hogs continue to come to market at heavy weights, I thought perhaps packers were a little short on hogs and were trying to make up by finishing to heavier weights.

And that may have been the case.

Or strategically they were banking on the price of hogs showing some strength during the summer and were keeping their bids a bit firm to bring in the non-packer hogs and hold back some of their own for the higher summer price.

Either way, it has worked for the packers. They have bringing in a few more of their hogs while the price is higher.

And all the while the producers of index hogs have been steadily bringing their hogs to market in the 211.4# to 213.0# weight range.

I cleared off my long MMM pig at a small profit and am now looking for a dip to buy him back. The spread trades are very quiet for me today. Am gradually getting my boat loaded again especially with the long N/Qs and short V/Zs. I hope I don't have things all backwards!

Best wishes,

dhm