1/19/17 was up again but not much +0.05 to 67.03 putting the GGGs at a discount of -1.91 to the component. "The Market" is thinking that the packers appetite for hogs is slowing and so they have priced the GGGs discount to the component. The market may or may not be right. Sometimes it makes a mistake.
The six-day moving average carcass weight moved up to 213.42#. That is only -0.79# year/year. Producers are letting their hogs gradually move up in weight and it it the packers that are producing heavy hogs. Their hogs are +4.66# heavier than the non-packer hogs. Today packer hogs were 1/4#heavier and non-packer hogs were down -1/2#. Index hogs came in a bit heavier today at 212.08#. As near as I can tell, producers are mostly staying quite current in their shipments but packers continue to hold their hogs to heavier weights. Producer hogs are coming to market 1.58# heavier than one-year ago and non-packer hogs are down -2.72# from this date last year.
Could this be telling us that non-packer producers are running scared that there is going to be a crash in hog prices so they are shipping at a brisk clip and packers are running scared that they are not going to be able to bring in pork to meet their needs so they are finishing hogs to heavier weights? Just don't know. I study the data and tell you what I am seeing and you have to decide what it means.
From the noon reports the packers were still bidding hogs up a bit so the will probably not turn down for at least another day or two.
ITZ, it is when there is a significant "Gap" that we get a limit or near-limit "Gap" closing move. We have already had that and it does not appear to me that the discount we are now seeing is sufficient to generate a near-limit up move to close a puny -1.91 discount "Gap".
Today I have loaded my boat with long Q/V calendar spreads. I may have piled on too many. This I know, my boat is riding mighty low in the water and a severe storm better not hit.
Now I have to wait around for the weekly T-Bond options to expire. It looks like I may harvest enough option premium to keep my margin in good stead even with an over-load of Q/V spreads.
Best wishes,
dhm