CME switched to the Lean Hog Index on 11/1/1995, there have been two classic "Valleys" posted. One was on 12/18/98 when the index dipped to 17.94 and the other was on 9/6/2002.

Since then there have been four or five less distinct valley but significant enough to make us aware that the Hog Cycle is still in operation. We are now in the chase for another "Valley" following the"Peak" of 107.84 hit on 8/10/11. It has not been posted by the CME Index yet but it may have been posted by the VVVs last week. I say it has not been posted by the Index yet because the component for yesterday will be down again when the data on yesterday's kill comes out.

Actually I will be quite surprised if the Index heads higher before the next H&P report comes out because cutouts are still in a major crash mode and packers are sitting on their wallets big time. The model is showing that packers have created a log jam of about 350K head of hogs in producers' barns. We may be seeing a portion of that log jam starting to come to market this week. We saw a big drop in cut outs yesterday as packers strive to peddle all the pork they are producing. That left the packers in a very sour mood and they took it out on the producers. The model projects that they dropped the Purchase index by -$1.21 yesterday. That number will be up-dated in a couple of hours but I doubt it will go from a downer to an upper.

Like Chair Yellen, who will be yell'n this afternoon, I am data dependent. Currently the data is NOT friendly the producers but consumers may enjoy if the retailers and packers choose to pass the low prices on!

Best wishes,

dhm