8/9/17 was down 0.16 to 85.41 putting the QQQs at a discount of -1.11 to the component. The model calculates that the component will need to drop an average of -0.42 for the next three days to close that "Gap". That does not seem to be the trajectory we are on so I am still long a couple of QQQs. The VVVs are discounted to the component by -17.34. That really seems wide to me but one thing packers know how to do is cut their bids when their margins get pinched.

The six-day moving average carcass weight firmed to 207.00#. That is -0.65# yr/yr. Index hogs were a bit lighter at 206.89#. Packer hogs are a bit lighter by -0.72#. The packer kill was strong again yesterday. It appears to me that packers have expanded their production of hogs and they are not quite as current in their shipments as they were a few weeks ago. These numbers do not hint of any shortage of hog numbers yet the kill this week is running -3.14% below the same week last year. That is out of harmony with what the last H&P report was suggesting.

Almost always in the fall when weather cools and producers fill their feeders with fresh-picked corn, hogs grow rapidly and the kill rate balloons up. There is nothing to suggest that will not happen this year and traders are ready for it having pushed the VVVs to a near 20-point discount to the component. That fits with an ITZ MOVE. And we have two-months for that move to take place. I don't know which way to jump with the VVVs but I did sell a pair of Q/V spreads this morning at 16.50 so I may be left with a pair of long VVVs next week.

Best wishes,

dhm