9-2-14 was UP +$0.39. That is the first UP day we have had since 7/15/14 and breaks a 34-day down trend that has seen a VVV discount of 20.22 to the index move to a premium of 4.28. That is a huge swing and was brought about by a combination of the VVVs surging and the index collapsing.

The model is projecting that the CME Lean Hog Index component on the 9/2/14 kill will fall between -0.15 and -0.45. Packers still have a fair-sized inventory of cheaper hogs already purchased which should keep the component on yesterday's kill showing some weakness.

Sometime ago I postulated that there would be a lot of volatility in the VVVs as we move into the fall. The market has now dished out plenty of volatility. The problem is that I have not known what to do with it. Consequently my accounts have struggled and they would have gone south but the spreads in the deferred contracts kept that from happening in a big way.

With packers bidding up yesterday and the kill being down, I'm now suspecting that the USDA missed on the last H&P report. The kill since 6/1/14 is lower than projected by 773k. Part of that may be producers withholding hogs to get heavier weight and part may be gilt retention. I think it is going to turn out that the USDA will be revising the June numbers downward a little.

Just to make the day interesting, I bought a VVV @ 100.30. I will let the market play with it a while but may end up aborting the trade.

Best wishes,

dhm