10/27/14 was down -$1.34 and the model projects that the CME Index component on the kill of 10-27-14 will be down between -1.25 and -1.55.

Even though packers were bidding lower for hogs, they were able to make a solid purchase at 121% of the moving average daily purchases. Producers seem to be willing sellers even at lower prices. So far there is nothing to suggest that the supply of market-ready hogs is getting tight. Yesterday the moving average carcass weight was up a little and packers had 1.76% more hogs scheduled than on the same date last year. It should have been down 3% to 4% according to the last H&P report.

The Index to ZZZ "Gap" continues to be at an historically high level. An average over the past ten-years, from this date until cash settlement the average change in the CME Index has been ZERO - no change. There is generally a lot of volatility between now and cash settlement but on average it has returned to the point where it was on this date.

But some years it is really wild. The most the CME Index has gained during that period was +10.72 in 2009 and the most it has ever lost was -7.57 in 2013.

At last night's settle traders had the ZZZs priced for the CME Index to lose 8.51.

From the above data, you can see that not once in the last ten-years has the index given up that much between now and ZZZs going to cash settlement.

This morning it looks like traders are assessing what they have done and are saying, "Whoops! We took the ZZZs down too much."

I think we are in for quite a bit of volatility as traders play musical chairs with each other to see who is going to be standing holding the "Hot Potato" when the ZZZs expire. I'm still holding one short ZZZ and it is a hot potato!

Best wishes,

dhm