MURICO.com Forum

The CME Lean Hog Index component on the kill for -

4/16/18 was UP +0.87 to 54.51. The KKKs settled premium to the component by 13.39. Traders are obviously expecting a major, major rally in the price of hogs. The model projects that the component will need to jump an average of 0.685 per day to close that "Gap" with nineteen more days of data to come in.

Can that happen?

You better believe it can happen. In 2015 the Index moved up 17.94 in that time period. But the carcasses jumped 18.23 that year to push packers to produce more pork. Carcasses are not moving forward very fast right now. Today they were up a paltry 0.06 pushed along by a 1.43 gain by the bellies.

Will the packers push the index up enough to close the "Gap"? My bias is that they will NOT and the KKKs will end up dropping back a little. There will undoubtedly be plenty of volatility as traders jump at shadows in the dark.

Today the 6-day moving average carcass weight dipped to 214.91#. That is +1.42# year/year. Index hogs were up a little at 214.03#. Packer hogs were about 1/2# lighter and non-packer hogs were down about -3/4#. Even so, packer hogs are running +3.18# heavier than the non-packer hogs. The percentage of packer hogs in the kill mix on a 200-day moving average basis has been 32.86%. The last six-days the packer percentage has been up at 33.92%. Heavier hogs and more of them points to more packer expansion than the non-packers. Furthermore packers may not be quite as current in their shipments as the non-packers but it does appear that packers are wanting to process heavier hogs.

I'm still a tiny bit short the KKKs and have scalped them a little. I doubt they were suckers IZT threw back. I think he steers clear of the il-liquid KKKs. I probably should too for that matter!! But someone needs to trade them if they are to ever become respectable. as far as that goes.