3/8/17 was up +$0.24 and the model projects that the component on yesterday's kill will fall in the range of -0.10 to +0.20. The JJJs settled discount to the component by -4.21. That is not much of a "Gap" and packers can close "Gaps" like that in a day or two but I'm just feeling that the JJJs are going to participate in the "Gap" closure by tacking on another half to full point by the time we get to cash settlement.

Of course there is going to be plenty of Up/Down, Up/Down stuff between now and cash settlement and it is too early for me to get long planning to hold to cash settlement. I think we are in a very difficult market for producers who are trying to hedge their production.

Even though packers sweetened their bids a little, they only made a fair purchase at 88.8% of the moving average daily purchases. The kill rate is not coming in like the model was projecting from the last H&P report. It isn't that producers are falling behind in their shipments. The six-day moving average carcass weight is trailing last year and it is a bit lower than it was the last part of January. Packers seem to be killing a few more of their owned hogs and their hogs are not as much heavier than the non-packer hogs as they were. I don't think packers are shying away from the non-packers because their bids have firmed. This is just beginning to smack of the inventory of market ready hogs being below what the USDA projected in the last H&P Report.

Now mind you, I am NOT turning wildly bullish, but I am willing to take the risk of having naked short 65 and 66 JJJ puts and I will attempt to scalp the JJJs by buying dips and selling rallies. I just entered the long side on this mild dip this morning. I'm often a very good fade so that may be a signal to get short.

Best wishes,

dhm