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The CME Lean Hog Index component on the kill for -

10/3/18 was up +0.11 to 69.21. The VVVs are now trading discount to the component with seven more days of data to come in before we go to cash settlement. The probability is fairly high that the component will be up again tomorrow because the packers still have some more expensive hogs purchased that will need to be processed. So I will continue to stay long the VVVs. Today I have scalped them a little.

The six-day moving average carcass weight firmed to 209.2#. That is -0.36# year/year. The decline in the year over year "Gap" makes me think that the supply of market ready hogs is building. Index hogs are also getting heavier at 209.2#. This usually happens this time of the year when fresh corn begins to show up in the feeders and the weather cools. Both Packer and non-packer hogs were heavier and packer hogs are now +1.91# heavier than the non-packer hogs.

The percentage of packer hogs in the kill mix has been running at a significantly higher level than usual. I have been tracking these percentages for several months now and it appears that there is a tendency for the percentage of packer hogs in the kill mix to increase prior to a decline in the CME Lean Hog Index. If that tendency continues this fall, we will shortly see the CME Lean Hog Index begin to decline. "The Market" thinks the decline will occur before the VVVs go to cash settlement and have the VVVs trading at a discount to the component. The uptrend in both the Purchase Index and the CME Lean Hog index is still intact so I will stay long the VVVs for a while longer. But I don't have as many longs as I had last week.

I am still long the summer futures and added another long QQQ pig today.

Best wishes,

dhm