5/4/17 WAS up +1.28 to 64.19. The KKKs settled premium to the component by 5.21 and the MMMs were premium by 12.14. The model projects that the component will need to jump by an average of 0.85 each day to push the cash settlement index up to where the KKKs are trading. The model is not able to project a trend to give me a cash settlement index
for the KKKs but my hunch in that packers are now buying hogs to meet their Memorial Day orders and there will not be follow through buying-panic on the part of packers all the way from now to cash settlement. That has me thinking, "Get short the KKKs." But I'm flat right now. I will try scalping the MMMs from the short side today but won't turn my back on a very good long set=up.

The 6-day moving average carcass weight has been on a slight decline the past few days suggesting that hogs are being pulled forward by these higher prices. It now stands at 212.55%. That is -1.37# yr/yr. Index hogs are a bit lighter at 212.33# and packer hogs are heavier by +1.37#. Friday morning packers were trying to purchase "Negotiated Hogs" much lower but by the end of the day they had sweetened their bids. I think when we get the morning reports, we will find that packers ended up throwing money at the negotiated hogs.

Packers seem to be short-bought to meet their Memorial Day needs. Furthermore, there seems to be a mild-bit of a disconnect between the kill rate and the number of hogs the USDA promised us in the last H&P report.

Best wishes,

dhm