3/21/18 kill was down -0.78 to 62.65. The JJJs settled discount to the component by -1.32. Obviously traders are thinking we are headed lower and they are probably right. I say that because the component has been in a strong down trend so packers have a substantial inventory of hogs purchased that they have bought at progressively lower and lower prices. I have not seen an up tic in the Purchase Index since 3/7/18 and then it was just a one-day up-tic of a puny +0.10. Generally when we are in a strong down-trend like this, the Purchase Index has to turn up for a couple of days before the component reverses and heads up.
Carcass weights are still holding firm. Index hogs were up to 214.41# today. It is possible that packers have been liquidating their inventory of market hogs a little. For the last week or so the percentage of packer hogs in the kill-mix has been a bit higher than usual. If this is the case, it could cause the non-packer hogs to be backed up a bit.
The kill since 12/1/17 has been between 200K and 300K greater than the model projected from the last H&P report. In addition to that, the carcass weights are running nearly 2.0# heavier than one-year ago. The heavier carcass weights may or may not indicate that producers have fallen behind a bit in their shipments rather it may be that packers are wanting the efficiency of processing heavier hogs. Even if that is the case, it still adds up to more pork that packers have to sell and they seem to have to cave-in on their pork-prices a little bit more day-by-day to clear the mountain of pork off the packing house floors.
Today bellies dropped below a buck a pound.
I can't remember when I saw that the last time.
The J/K spreads have been treating my very well. I wish I could say the same thing about the M/Ns. They have quite a bit of time left to trade so i may be all right there. I finally got a little bit short the JJJs yesterday. I can plainly see now that I should have got short a bunch of them weeks ago.
"If our foresight were as good as our hind-sight, we'd be a dam-sight better off !" to quote my friend's grandmother.
If we get into a trade war and some of our trading partners opt to curtail their pork purchases, we could find ourselves at the peak of the hog cycle and when that happens, it can be brutal finding the valley in hog prices so there may still be time for me to get more shorts in place. Maybe if the JJJs and MMMs bounce tomorrow, I will consider it a "Dead Cat" bounce and sell a little.
Best wishes,
dhm