5/9/17 was up 1.47 to 68.35. The KKKs are now trading premium to the component by 2.61 and the MMMs are +9.28. The component will need to jump 1.10 per day to close the "Gap". During the last five-days it has gained an average trying to buy KKKs on a dip. So far traders are not falling all over each other to sell the KKKs so I may not get many.

The six-day moving average carcass weight dipped o 211.80#. That is -1.45# year/year. Packer hogs are heavier by +1.40# and Index hogs are lighter at 211.55#. I believe producers of index hogs are very current in their shipments. In fact packers may have pulled index hogs forward a bit with their higher bid prices. The percentage of packer hogs in the kill continues to run a bit higher than usual. Maybe they have expanded production and the rest of the producers are fairly stable or even down a little. The kill rate lately seems to be less than expected from the last H&P report.

Now a word or two about the V/Z calendar spread. On average over the last six-years the spread has traded at +4.90 and currently it is trading at 5.625. But there is a lot more to the story than that. In that time frame it has traded as high as 15.3 and as low as -0.100. That is a huge range. The average price on this date over the past 6-years has been 4.229 with a high of 9.15 and a low of 1.525. Last year on this date it was trading at 5.1 and it went on a bull run climbing above 8.00 by the middle of June. I believe runs like this are driven more by technical/emotional factors than by the fundamentals. That lofty pricing did not hold and toward the end of July it had broken below 4.00 and rallied above 8.00 when it went to cash settlement. I am cautiously short the V/Z spread and will scale in and out as it jumps around as it undoubtedly will because the hogs that will come to market are just beginning to be farrowed now. When trading this spread, one needs to be prepared for a bumpy ride.

Best wishes,

dhm