8-28-14 kill dropped +1.34 to 96.89. That has put the VVVs premium to the component by +1.54. It is truly amazing to see a discount of 16.00 turn into a premium in about two-weeks. The dynamics really fell into place to knock the props out from under the hog market.

I suppose it it possible for the kill rate to collapse and the Index could shoot right back up but that is usually not what happens this time of the year.

There continues to be a dis-harmony between the kill rate since 6/1/14 and the USDA H&P report. My Hog Pricing Model is showing 648K fewer hogs killed than projected from the H&P report. At one point I was thinking that perhaps producers had fallen behind in their shipments. The smaller-than-expected kill has gone on so long that I now think their were 2.6% to 2.9% fewer hogs than the USDA estimated.

This may be a factor in the strength the VVVs are showing today.

The 6-day moving average carcass weight showed a little weakness today and it all came from the non-packer hogs. Packer hogs were actually a bit heavier. The 6-day weights are still running +8.65# yr/yr. That is keeping the supply of pork ample. I decided to sell a VVV pig at 98.30. A limit move does not seem to be appropriate on a day like today.

Best wishes,

dhm