2/8/18 was down -0.42 to 55.98. The component has now been down five-days in a row. Packers have a fair sized inventory of cheaper hogs purchased so I am expecting the component to be down again later today when we get the numbers on Monday's kill. The GGGs settled discount to the component by -0.80 so traders are expecting the component to drift a bit lower over the next few days.

The six-day moving average carcass weight firmed to 215.64#. That is +0.83# year/year. Index hogs were also a bit heavier but they continue to lag total hogs at 214.33#. Packer hogs are now only +2.04# heavier than the non-packer hogs. This would seem to indicate that the high kill rate of packer hogs over the past few weeks has the packers more current in their shipments. It wasn't long ago that packer hogs were running nearly 4.0# heavier than the non-packer hogs. The data continues to show that packers have expanded their production capability significantly. Yesterday the six-day moving average percentage of packer hogs in the kill mix was 36.2%. One year ago it was 33.7%. The stage now may be set to force some marginal producers out of the hog business and packers seem to be gearing up to replace them or maybe even force them out.

The cutouts showed a little firmness after having been down for the past four days. It is possible, Spike, that this is the first hint that a change in price action is starting to catch-hold.
We almost always see some firmness in the CME Lean Hog Index between now and Independence Day and "The Market" has build nearly a 20-point "Gap" into the MMMs in recognition of this tendency. If China comes into the market in a significant way, the "Gap" may be too low. If the liquidation phase is still going on in China by then, it may be too big of a "Gap". ITZ has me on guard for a March wash-out. I suppose the lower trend of the past month could be the March wash-out coming early. There seems to be enough uncertainty in the hog market to keep life exciting for the next several months and probably longer..

Best wishes,

dhm