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The U.S.D.A. says, 'Forget about those - - -

350K of backlogged hogs. They are NOT there!!''

But there may be 67K back-logged since 9/1/17.

This makes me view the report neutral to bearish for the VVVs and ZZZs. We may see the V/Z spread return to more reasonable numbers now. It headed in that direction today.

From the afternoon reports the Model projects that the Purchase Index will be UP +$0.27. It has been more than a month since we have had an up-tic in the Purchase Index. Even though it projects the Purchase Index will be up, it projects the component on today's kill will drop between -0.20 and -0.50 because packers still have quite an inventory of cheaper hogs purchased. The final Purchase Index is often quite different from that projected from the noon and afternoon reports. I hope the packers get their numbers out promptly in the morning so that we can have a final Purchase Index before the market opens tomorrow.

I took profits on quite a few short VVVs today so I have space on my boat to put them back on if the VVVs stage an early morning rally tomorrow. Since I still have a nice inventory of short VVVs, it might be a good idea to wait until Monday so I don't go into the weekend with too much risk. Besides that, tomorrow is the end of the month and I have a good September going and I would not want to mess it up.

In any event, the Hog Cycle has not been repealed! It is alive and well and remains the classic of all production cycles. We know when the "Peak" to this cycle was posted. Hog prices have been declining with such gusto that we are well advised that we are now in the chase looking for the "Valley". With the number of market hogs in the report at the high end of the pre-report estimates, it is doubtful that we have seen the "Valley" for the CME Index yet. It is possible that the "Valley" for the Index may not come until after the VVVs have expired. With the ZZZs having settled premium to the component by 3.06, it seems to me there is some risk that the ZZZs will give up some of their recent gains.

Cut outs were a little weak again today and that suggests demand is still being overwhelmed by the high level of pork currently being produced. Of course that could change in a hurry if the 1.3 billion Chinese see pork as a bargain. That many people can carry off a lot of pork in a hurry.

Best wishes,

dhm

Messages In This Thread

The U.S.D.A. says, 'Forget about those - - -
Re: The U.S.D.A. says, 'Forget about those - - -
Very nice call on the - - -
Re: I agree with DH-----
It just might be that the run-up in the - -