3/29/19 was up +0.56 and the model projects the component on Friday's kill will be up between +1.05 and +1.35. The JJJs settled premium to the component by +2.53. Assuming the component on Friday's kill is 1.05, then it only takes an average daily gain of 0.15 to close the "Gap".

With their higher bids on Friday, by the time the afternoon report was compiled, packers had purchased 92.1% of the moving average daily purchases of total hogs and 102.6% on the Index hogs. Generally the purchases packers make on Friday will run 115% to 120% of the moving average daily purchases. This suggests to me that packers would have been anxious to buy hogs Friday afternoon and there is a good chance that the Final Purchase Index will move up a bit when we get it Monday morning. The kill Friday was a rather large kill running 5.61% higher than the same week last year. Since 3/1/19 the model calculates that the kill has been 215K higher than projected from the H&P Report. I interpret this to mean that either that many hogs have been pulled forward or else the USDA missed on its count by 215K of hogs.

Lately the H&P Reports have been quite good so my bias is that hogs are being pulled forward. If demand holds, the stage is set for continued firmness in the CME Lean Hog Index as we move toward the Independence Day Holiday and the weekend sell-off in the futures will turn out to have been an emotional/technical correction that will not hold.

On the other hand, if Trump closes the border with Mexico and we lose that market and China does not pick up the slack, the weakness seen Thursday and Friday will be the tip of the iceberg for the carnage that will occur this spring in the hog market.

Best wishes,

Doc

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