3/6/19 was down -0.16 to 51.67. It looks like the JJJs settled premium to the component by 6.43. That is quite a "Gap" which clearly says "The Market" is NOT expecting a March wash-out. Or maybe it is saying that we have already had the wash-out and now we head higher? "The Market" is not always right. It very often mis-prices and it is the hog market that is notorious for doing that!!

The six-day moving average carcass weight firmed to 215.34#. That is +0.60# yr/yr. Packer hogs are heavier than non-packer hogs by +4.75#. That is the largest number we have seen for a while and it indicates that packers are producing more pork and have plenty of hogs in their barns they can ship. It could possibly mean that packers think the price of pork is going up so they are NOT feeling rushed to move their hogs to market. In actuality, packers are moving plenty of hogs to market. The average percentage of packer hogs in the kill-mix over the past six-days has been 36.8%. One year ago it was 32.96%. Clearly packers are expanding in a big, BIG WAY. If there is much more of a March wash-out, it will be a bunch of marginal producers that will be washed out.

The Purchase Index that I calculate has been up three of the past six-days. With the cutouts moving up more than a point yesterday, I am expecting the Purchase Index for yesterday to have another "UP" day. That would be consistent with what "The Market" is thinking with the big "Gap" it has priced into the JJJs. I will be a bit surprised if the Index moves up enough to nudge the JJJs even higher.

There may be more March wash-out coming but I doubt that it will be of a magnitude sufficient to challenge the Index low of 45.30 posted on 9/3/18. This leads me to conclude that the low for this Hog Cycle has now been posted and we are "Off to the races" looking for the next Hog Cycle High. If Trump and Xi come to a meeting of the minds and China's back-yard producers finish their liquidation, the next Hog Cycle "High" could be mighty sweet for producers. But there is a word of caution - after the next Hog Cycle "High" will come a Hog
Cycle "Low" and it could be brutal if American producers gear up to feed the Chinese and the Chinese then solve their ASF problem by building great numbers of large, bio-secure facilities leaving American producers far over-expanded.

That would be down the road three to five years.

For now, I am wanting to buy more deferred contracts. They did not dip low enough yesterday to hit my orders. So I will try again tomorrow.

Best wishes,,

dhm