10/20/14 was weak, indeed, coming in down -1.10 to 104.87. With cutouts yesterday at 106.46, packers are likely wanting to lower their cost of product and will take more off their bids today. With holidays coming up, I was a bit surprised to see hams off by more than 17 bucks. That's one heck of a one-day hair cut.

The 6-day moving average carcass wt was at 214.39# down a fraction but still +4.99# yr/yr. It was mostly the packer hogs that were lighter in weight and what's more the percentage of packer hogs killed yesterday dipped to 31.73%. That is about 1% below their usual percentage. If this means that packers had to ship lighter hogs and still came up with a soft kill of their hogs, it continues to support my feeling that packers suffered more piglet losses than non-packers.

The kill since 9/1/14 is trailing the projected kill from the Hog Pricing Model by 161k. We had been seeing the yr/yr increase in carcass weights running about 8.5#. With it being down to 4.99#, there is the possibility producers have been liquidating some of their heavies. It seems reasonable that dropping the carcass weight by 3.5# might represent almost one day's kill having been pulled forward.

If producers are seeing good numbers of lighter weight hogs in their finishing pens, they may be shipping hogs at a brisk clip right now as they see the price of primal cuts crumble and packers respond with weak bids.

If they are aggressively shipping hogs, it does not necessarily mean that tight supplies are on the way IF the spring farrowings were favorable and the PED virus impact had moderated.

And so the uncertainty continues!

I continue to think we are seeing a miss-pricing of the Z/G spread. On average over the past 11-years it has gone off the board at -3.20. Only once during that period was it positive and then only by +1.15. I added another short Z/G this morning at +2.975 and should have pulled a Dewey and sold 60. But I'm like ITZ and have to watch my risk closely. Selling the Z/G spreads this summer has treated me well.

Best wishes,

dhm