7/25/17 was down -0.35 to 89.67. The QQQs are trading discount to the component by -7.55 and the VVVs are discounted by 22.07. That clearly tells us that hogs are headed lower and that is no surprise because they always head lower in the fall. If the drop yesterday of -0.35 if the pattern from now until cash settlement, the model shows that the cash settlement index will 84.96. On the other hand, the average decline in the component over the past five days has been -0.51. If that is the pattern, we get a cash settlement index of 82.85.

Obviously I don't know where we are headed but I am suspecting that packers were getting some of their "Heavy lifting" done Friday and Monday when the whacked the component by more than 70 tics. Going forward we will mostly see something less than that. We do know that when packers margins suffer, they get mighty cranky and brutal in the way they cut their bid prices.

The six-day moving average carcass weight eased to 206.78# this morning. Warm weather could explain that. That is1.45# yr/yr. Producers are staying current in their shipments, Packer hogs are -.45# under non-packer hogs. Packer kill was quite heavy again yesterday. I think packers have been moving their hogs out ahead of the price decline.

My load of QQQs is a bit less now and besides that, I have sold quite a few 83 calls against them. That buck premium I received will cushion a sell-off a bit.

Best wishes,

dhm