good at the technicals so it is always a help to get some technical input to go along with what the fundamentals seem to be saying. This is the third week when we are seeing powerfully strong kill numbers. With carcass weights being very strong, I don't think it is suggesting that producers are capitulating and liquidating inventory. At this point I tend to think it means that producers have strong numbers in their barns. It just might be that it is the packers who are loaded with market hogs. I say that because the percentage of packer hogs in the kill mix is climbing and they are now coming in more than three pounds heavier than the non-packer hogs.

I have built a loop into my hog pricing model that calculates packers' blended average cost of carcasses. Today it was 61.94. With cutouts at 68.08 today, packers have a gross margin of 6.14. But the cutout numbers represent less than 10% of the pork produced. A larger percentage of the pork is traded under longer term contracts so packers are probably realizing somewhat more than the 61.94 we saw today. My feeling, then, is that packers' margins are in fairly good shape so they may not be under a lot of pressure to slash their bids.

At the same time the supply of hogs seems to be ample so packers should be able to get good numbers without having to bump their bids up much. Actually I was a bit surprised that the component on Monday's kill jumped 1.47. I'm scratching my head and wondering where they got all those expensive hogs. They didn't seem to be in the morning reports that I used to generate the Purchase Index this morning.

Over the past five days the component has gained an average of 1.07 per day. If that were to continue, the KKKs would go to cash settlement at 75.39. I will be one mighty surprised puppy if we see that happen!! I decided to get short the KKKs on 4/19/18 looking for a couple of points. They are now down three on three; it may be time for me to think about making a trip to the bank.

Best wishes,

dhm