Cash was down .50 yesterday with more of the same in store for today. While the cutout was down .57 at $102.21 packer margins remain highly profitable. This week’s hog slaughter is projected to be 2.214 million, or unchanged from last week and up only 1% from last year. So going into the last week of July we’re not experiencing an increase in butcher hog numbers and production yet. Demand for bellies has yet to peak despite record high prices. The monthly cold storage confirmed that frozen belly stocks at the end of June stood record small at 22.2 million pounds. Stocks have NEVER been this tight in the middle of summer. I contend the new inelastic demand facing the bacon market will continue to drive prices upward. The weakness in the dollar is going to keep hams and butts in a good pricing positon for export. Loins are sloppy. Lastly, Aug futures are $11 discount and they likely carry way too much discount in my opinion. The play is simple, buy calls and take into expiration. I’d expect Oct hogs to uncover strong support approaching 6500. Open interest is increasing in the fall and winter contracts as hedgers lock in profitable prices.

DH, I bought more Aug yesterday and have orders in to buy again today at 80.375 if they get there and again at 80.02. It is hard for me to believe there is a shortage of bellies when so many hogs are being slaughtered! If bellies were still being traded and being delivered we would have fireworks in the Aug contract!

Dewey