The afternoon Purchase Index for - - -

4/4/49 was up +0.20 and the model projects the component on the kill for yesterday will be up between +0.40 and +0.70. The JJJs settled premium to the component by +1.16.
Assuming we get a jump in the component of +0.40 on yesterday's kill, then the component will need to gain average of only +0.14 to close the "Gap". The trajectory of the up-trend appears to me to be much stronger than that so I am accumulating some long JJJs to take to cash settlement. The risk seems to be a reasonable business man's risk.

By the time the afternoon reports came out, packers had purchased 84.7% of the daily moving average daily purchases of total hogs and 94.2% on the INdex hogs. That is about average for this day of the week. The kill since 3/1/19 is coming in somewhat stronger than the projections from the last H&P report by about 200K head of hogs. If the strong kill we are seeing this week continues, it may go even higher. Either the USDA missed on their count of 180# and heavier hogs or else hogs are being pulled forward.

My bias is that Index hogs are being pulled forward being pulled forward because the carcass weight of INdex hogs has fallen from over 214# to the 213# range and that is about two pounds lighter than the six-day moving average carcass weight and almost six pound lighter than the packer hogs. Packers know the hog market better I and the fact they are shipping more hogs and they are heavier tells me packers are bullish. If they are bullish, I want to be bullish.

It is now strongly confirmed that the Hog Cycle "Trough" was hit on 9/3/18 when the CME Lean Hog Index dribbled down to 45.30. We are now in the chase looking for the "Crest" to this Hog Cycle. The last super high "Crest" was 134.17 posted on 7/16/14 at the height of the the swine flu epidemic. If China is losing as many hogs as reports are projecting, that "Crest" could be matched if Trump and Xi can come to a meeting of the minds. China WILL solve their ASF problem and when they do, that will lead us to the next "Trough".

And what a "Trough" it might be!!

But it will not come until after the "Crest" and the "Crest" is probably 12 to 24 months down the road perhaps July or August of 2020.

In the mean time, we can expect volatility in the hogs to be rather extreme due to all the uncertainty now facing us.

Best wishes,