8/12/16 was "U P" +0.10! There is a good chance that this represents a major reversal of the rather extended downtrend we have experienced. It appears that packers still have a fair sized inventory of cheaper hogs already purchased so the model projects that the component on Friday's kill will fall in the range of unchanged to -0.30. The next stop is likely up.

Over the weekend I spent some time working with the hog numbers. There is a good chance that the decline we have observed in the 6-day moving average carcass weight of packer hogs represents some liquidation of their inventory per equal to a one-day kill of something like 300K. Also the lower-than-projected kill during June may indicate that there were not quite as many market hogs as the H&P report showed. The fact that the six-day moving average carcass weight is running nearly two pounds below the same date last year points to the probability that producers are very current in their shipments.

The kill last week was only +0.95% over the same week last year compared to a projected 1.2% increase and pork production was only +0.7%. This indicated that the lighter-than-last-year hogs are slowing pork production a bit.

These numbers seem to contradict the bearish bias I read on the Internet so I am now mildly long the VVVs and have a few calendar spread just about everywhere.

Best wishes,

dhm