MURICO.com Forum

The CME Lean Hog Index component on the kill for -

6/13/18 was up 1.16 to 80.66 and that will be 50% of the cash settlement index for the MMMs. The model calculates that it will take a gain of 1.09 on today's kill to close the "Gap". Packers may have the capability to pick and choose which batch of high or low priced hogs that they kill on a given day. If that is the case, I suppose they could move the today's component up or down depending on whether they are short or long. Considering the number of packers involved, it is not likely that would occur, however. At any rate the up trend appears to be strong enough to prevent there being much risk for going to cash settlement long the MMMs.

The 6-day moving average carcass weight firmed to 209.94#. That is +0.89# yr/yr. Packer hogs are heavier than non-packer hogs by +1.49#. Not long ago packer hogs were heavier by more than 4.0#. It appears that packers geared up for this period of low-kill and they have now been getting more current in their shipments. They know this business better than you and I!! Non-packer hogs dropped about 1/2#. And that is not surprising in this warmer weather.

Over the past 200-days packer hogs have made up 33.02% of the kill but for the past six-days packer hogs have been 35.36% of the kill. Maybe I am becoming over-sensitive about what the packers are doing but it seems to me they are in a position to know more about both the supply AND demand side of the business and analyzing what they are doing is a worthwhile undertaking.

I too profits on a bunch more long Q/V spreads today. The Q/V spreads have really been treating me well this year but there is a lot of risk there. Over the past seven years they have traded in the range of +25.83 to 4.97. A person could lose his shirt with a range like that if caught on the wrong side with a boat loaded!

Best wishes,

dhm