5/21/18 was up +0.27 to 68.85. That was in the projected range but on the low side. This, together with the low purchase yesterday, may be an early hint that packers are going to be bidding a bit softer now that the Memorial Day demand surge is essentially over. Packer hogs made up 34.41% of the kill mix over the past six-days. That is somewhat higher than the 32.96% 200-day moving average. It appears that packers have either expanded their vertical integration and are now producing more of the hogs they process or else they geared up for the holiday by finishing their hogs to heavier weights and concentrated on killing purchased hogs as they finished theirs to heavier weights.

The MMMs are now trading premium to the component by +4.48. The model shows that the component must gain 0.27 per day to close that "Gap". If there is a mild slump in demand following the holiday run-up. it might not happen. There are 16 more days of data to come in to give us the cash settlement. Over the past eleven-years, from this date until cash settlement the index has gained a measly 0.04. However in 2013 it gained 9.00 and in 2010 it lost -8.56. Six of the eleven years it was down and it was up in five. The fact that packers seem to be well endowed with hogs makes me think they can ship enough hogs to keep the index a bit depressed and their margins in fine shape.

The six-day moving average carcass weight eased to 213.18#. That is +2.76# yr/yr. The trend toward processing heavier hogs is continuing with packers leading the way by shipping hogs that are +2.52# heavier than the non-packer hogs. Index hogs were lighter at 212.33#. Even though packer hogs are heavier, they were down 3/4# from the day before. That is quite a dip on a moving average. Non packer hogs were also a bit lighter. This is good growing weather so it means hogs are probably being shipped as fast as they are finishing.

Tomorrow we get the cold storage report. It doesn't seem to me that the low prices we have been seeing would be an incentive to pull pork out of storage so we may see firm numbers. That would not be good news coming on the end of the holiday demand rush.

This morning I sold a cattle/hog spread at 32.50. It didn't take me very long to cover that thing and head for the bank. Those spreads have treated me well this spring.

Best wishes,

dhm