8/15/16 was UP +0.46 and the model projects that the component on yesterday's kill will change in the range of -0.10 to +0.20. At the time of a trend change, it is really difficult to project the change in the component because packers will have and inventory of hogs purchased at the old price level and there is a lot of uncertainty relative to the batch of hogs that will be killed. Will they be mostly older purchased hogs or ones more recently purchased at the newer price level. It would not surprise me to see the component decline more than the projection.

Packers purchased 81.6% of the moving average purchases with their higher bids yesterday.

The numbers are beginning to suggest to me that a portion of the decline in the 6-day moving average carcass weight represents some liquidation by the producers of some of their inventory of market hogs and it is especially packers that have liquidated inventory. The low kill during June has me wondering if the H&P report actually over-stated the inventory of market hogs.

This increases the suspense as the next H&P report creeps closer.

The reversal of the down trend in the Purchase Index caused me to exit the short VVVs and get very mildly long.

Best wishes,

dhm