11/8/18 dropped -0.83 to 62.36 and the ZZZs settled discount to the component by -6.56. The model calculates that the component will need to drop an average of -0.28 per day from now until cash settlement to close that "Gap". On average over the past seven-years the component has declined an average of -0.04 per day from this date until cash settlement. The most it has dropped was -0.22 per day in 2018. In 2015 the component actually gained +0.33 per day from this date until cash settlement. The primal cuts took quite a hair-cut yesterday so it is possible that some weakness is on the way for the index.

The six-day moving average carcass weight firmed to 216.95#. That is +0.48# yr/yr. Packer hogs are running +2.60# heavier than non-packer hogs. Over the past 200-days packer hogs have comprised 34.15% of the kill mix but for the past six-days packer hogs have made up 34.8% of the kill mix. That is down from the 35.0% packers hogs we saw a couple of days ago. With packers hogs being heavier than the non-packer hogs, it may be suggesting that packers have fallen behind in their shipments. Furthermore, with packer hogs making up a larger percentage of the kill than usual, packers may be shipping their hogs in front of the non-packers before further price drops occur. Whatever the explanation, I remain convinced that packers have a much better handle on the hog market than the rest of us and following what they are doing can help us anticipate what may happen in the hog market.

I am still long the summer futures and continue to buy dips and sell rallies. I'm glad to hear, Tim, that you were able to pull some profits out of the Z/G spread. The K/M spread is now at the lowest level it has been for this time of the year. If it gets to a -9.00 it would be a tempting "Buy".

Best wishes,

dhm