projections, I decided this morning to look at the kill since 12/1/18 seeking some in-sight relative to whether or not producers are current in their shipments. My model projects that the kill since 12/1/18 should have been 34.289 million head. It was actually 34.466 million suggesting that 176,000 head may have been pulled forward. Before last week's much lower than projected kill the number that may have been pulled forward was 231,000.

The following are some of the assumptions I made in doing this:

1. The category of hogs by weight in the last H&P report was fairly accurate and this category was 1.47% greater than one year ago..

2. The hogs in the 180# and heavier category would finish at the rate of 2.25# gain per day.

3. The lightest of those hogs, that is those weighing 180# would need to add 108# to reach a market weight of 288# and this would take 48 days to clean up this category of hogs.

4. The 180# and up category would be marketed by 1/18/19 at which time producers would begin shipping from the 120# to 179# category.

5. The inventory of 120# to 179# category was 3.5% greater than the same period one year ago.

6. Hogs in the 120# to 179# category will finish at the rate of 1.95# per day and they will all be marketed by 3/14/19.

OBSERVATIONS:

- Since 12/3/18 the six-day moving average carcass weight has gradually moved from 213.93# to 215.20#. This is NOT confirming that producers have pulled hogs forward.

- The weight of Index hogs has also moved up from 212.82# to 213.72#.

- Packer hogs have gone from 215.59# to 217.03#.

- Packer hogs were +2.79# heavier than the non-packer hogs on 12/3/18 and they are now 3.21# heavier.

- The JJJs are now trading premium to the component by 4.54 One year ago the "Gap" was -0.11 with the futures being at a discount to the Index. But the Index was at 67.575 compared to the component being at 56.40 now.

- Cutouts were at 78.11 last year compared to 61.92 this year.

- Cutouts have been exhibiting a lot of volatility. One day they may be up a point or more and the next day they may drop even more. Since 12/3/18 cutouts have fallen -8.73. During the same period last year they fell -4.32.

TRADING CONCLUSIONS:

- With the high level of pork production it may be a big climb for the JJJs to jump four and a half points to close the "Gap" so I am short the JJJs.

- The low kill last week may be the first clue that producers are fairly current in their shipments and the customary decline in kill from January to June will happen again this year. Furthermore the Chinese backyard producers may be liquidating their sows and this may set the stage for increased exports if Trump and Zi can make a deal so I am long the deferred contracts and will now look for a dip to buy more.

Best wishes,

dhm