5/8/17 jumped 1.58 to 66.88. The KKKs are now trading premium to the component by 3.75 and the MMMs are +11.45. The model is showing that the component needs to tack on 1.05 each day to close the "Gap". It will probably happen.
The 6-day moving average carcass weight dipped to 212.11#. That is -1.43# yr/yr. It appears that packers are pulling hogs forward a bit with their higher and higher bids. Further more it is beginning to appear that the USDA did an over-count on the available marker hogs. Packers are continuing to rely on a bit larger percentage of packer hogs to meet their daily killing needs. Perhaps packers have sensed that this was happening and that explains their finishing hogs to a heavier weight. Both packer and non-packer hogs dipped in weight with packer hogs dipping a bit more than non-packer hogs. Index hogs were lighter still at 211.7#. If this indicates that there are fewer Index hogs in producers' barns because they have been pulled forward, I suppose we could see packers scrambling to see who gets to kill the index hogs for the Memorial Day grilling.
But -
The Memorial DAy demand surge will pass very quickly. Then what?
Historically there is a fairly strong tendency for the CME index to dip after the demand surge for Memorial DAy but it tends to be a temporary dip that is followed by another demand surge prior to the Independence Day holiday. I haven't checked to see historically how closely the futures contracts mimic the Index.
If it turns out that the producers' inventory of market hogs is somewhat less than the USDA estimated, there is a good chance that there will be significant strength in the QQQs relative to the VVVs. Over the past several weeks as the Q/V spread has been in the trash-can, I have been loading my boat. There is a fairly strong tendency for the spread to trade above 10.00 and it has even been known to get above 25.00.
So +
When it dipped below 7.00 it appeared to me that technical/emotional factors were running wild and the place to be was long the spread. Historically 11.00 ti 15.00 seems to be the appropriate trading range. One thing you can rely on - IT WILL JUMP AROUND QUITE A BIT!!!
Best wishes,
dhm