On Friday I checked the amount the CME Index gained following the expiration of the KKKs the last couple of years. This prompted me to write,"The MMMs are trading premium to the component by a "Grand Canyon-like Gap" of 13.59. It isn't often that we see the index move that much in a period of 22 trading days."

Over the weekend I decided to look more closely at the historical change tendency of the index following the expiration of the KKKs.

Here are some of the things I found:

1. In the past eleven years the index has gained an average of 1.99 in the 22-days leading up to the expiration of the MMMs.

2. In 2010 the index actually lost 10.79 during those 22-day.

3. The most it ever gained was 14.38 in 2012. I reviewed my notes and I don't have anything about my feelings at that time. The data shows that the index was at 94.26 and the cutouts were at 91.58 when the MMMs expired. Obviously packers got caught short bought and were having to chase hogs at any price. That does not seem to be the scenario this year with carcasses running +2.33# year over year and packer hogs weighing +4.33# heavier than the non-packer hogs. Not only are hogs coming in heavier, but the last H&P report projects there will be about 3.14% more of them than last year.

4. The only other years with double digit gains were 2013 with a gain of 10.34 and 2017 with a gain of 10.98. In all other years the index either lost or had a gain of less than 5.0.

5. The MMMs settled premium to the component by 10.70 Friday

6. For the "Gap" to be closed by the Index moving up, the component will need to gain an average of +0.45 per day. The component has moved up an average of 0.24 per day for the past ten-days and since the JJJs expired it has gained an average of +0.55 per day. The big gains by the index occurred the first six-days following the KKKs becoming front month when the component posted an average daily gain of 1.08 per day.

I'm wondering, "Have the Big Dogs run the MMMs up to an excessive "Gap" forcing under-capitalized producers to cover their hedges and now the Big Dogs are getting short and those producers will have their margin stripped away from them?"

It appears that someone was selling a bunch of MMMs Friday and the "Gap" experienced a significant"Gap" closing.

I just dunno but I am going to be joining the short MMM crowd tomorrow.

Best wishes,


''Those who do not learn history are doomed to repeat it.'' George Santayana

"It is not the historicals that determine hog prices but the supply and demand factors here and now!" dhm