7/11/18 was down -0.40 to 81.06. That was right in line with what the model was projecting. The NNNs are now trading discount to the component by -1.09 with three more days of data to get us to cash settlement. The model calculates that the component will need to drop an average of -0.40 per day to close the "Gap". It has dropped an average of -0.196 per day for the past five days. I see very little opportunity to go to cash settlement with the NNNs.

The six-day moving average carcass weight firmed to 207.93#. That is -0.14# yr./yr. All of the weight gains were in non-packer hogs because packer hogs dipped by 1/4#. Packer hogs are now lighter than the non-packer hogs by -0.85#. Packers are continuing to be aggressive shippers of hogs. Over the past six-days, packer hogs have made up 35.1% of the kill compared to 33.91% over the past 200-days. Perhaps this suggests that packers feel that there is a lot more weakness coming and they will be able to buy hogs cheaper than they can produce them. For a while I was a think packers may be expanding. Now it appears they were holding back shipping to meet the Holiday demand surge and they took that opportunity to empty their barns.

Generally I trade the Q/V spreads from the long side. The surge in the spread enabled me to get my profit target on all of the longs I had loaded onto my boat. When the spread surged to 17.25 today I could not resist the urge to probe the short side. On average over the past seven years it has gone off the board at 14.93 however in 2004 it screamed to 19.75 at cash settlement. I suppose it could do that again this year or maybe higher if a major sell hits the VVVs. The QQQs are trading discount to the component by -10.64 so they could bounce some and if the liquidation phase takes hold, the VVVs could dip.

There is always risk when trading hogs.

Today the market is playing "Head Games" with you Oct Put, Tim, unless you took it to the bank.

Best wishes,

dhm