1/7/19 was down -0.25 to 54.68. The GGGs settled premium to the component by +7.82. It looks to me like packers ran a bunch of expensive hogs through their plants on Friday and jumped the component 1.25 then on Monday they rounded up some cheaper ones and dropped the component by -0.25. The Purchase Index has risen every day since Christmas so we have an up trend of six straight days. This rising Purchase Index resulted in the component gaining an average of 0.47 per day for the past four days. Assuming this represents an up-trend that will continue at 60% of that rate, we would have an average daily gain in the component of +0.28 from now until the GGGs go to cash settlement. The model calculated this would result in a cash settlement price of 62.38. With the GGGs having settled yesterday at 62.60, Do you suppose "The Market" has them priced about right?

I think I will shift from HODLing GGGs to selling rallies and buying dips.

The 6-day moving average carcass weight eased to 216.37#. That is +1.70# yr/yr. It is the packers that are producing heavies. Packer hogs are +3.52# heavier than the non-packer hogs. Index hogs are a bit lighter at 215.03# suggesting that producers of Index hogs are a bit more current in their shipments than the rest of the industry. Is it possible that this could set the stage for a stronger rally in the price of index hogs in the event that a surge in demand occurs for some reason such as a ASF induced shortage?

This may be what packers are thinking because they have expanded their hog production significantly. During the last 6-days packer hogs have made up 37.2% of the kill mix. One year ago that percentage was 32.18%. Packers are producing more hogs and they are finishing them to heavier weights. Either they are bullish the hog market or they have strategically decided to vertically integrate to a significantly higher degree.

I am still long the summer futures and continue to sell rallies and buy dips while a HODL a few.

Best wishes,

Doc