5/30/19 was down -0.32 to 81.66. The MMMs settled premium to the component by +0.07. Cutouts posted a +0.83 gain on Friday to 82.65. The model calculates that packers have a margin of $2.14 per hog to pay for salaries, insurance, utilities, depreciation and the host of other expenses that go into running a packing plant. Something has to give.

The six-day moving average carcass weight firmed to 215.51#. That is +3.23# yr'/yr. Index hogs were also a bit heavier at 214.60#. Packer hogs were heavier than non-packer hogs by 2.10#. Hogs may have become a bit heavier because of the no-kill memorial day holiday. The percentage of packer hogs in the kill mix has declined quite a bit and packer hogs are not as much heavier than non-packer hogs as they were.

The kill since 3/1/19 has been 914K greater than the same period last year. From the last quarterly report the model projects the kill should have been 515k greater so the kill has been about 400K greater than projected from the last quarterly report. It seems to me that the USDA either under-counted the hog inventory or else hogs have been pulled forward by about 400K. With carcass weights running +3.23# yr/yr, there is a good chance that the USDA under-estimated the hog inventory. The rather rapid decline in the carcass weight of packer hogs makes me think that packers have been shipping their hogs at a rapid clip. Whether or not the hog count on 3/1/19 was correct, one thing is clear, packers are going to be anxious to fix their margin problems which they do by cutting the price they will pay for hogs. This they have been doing since 5/17/19 and quite likely that will continue and the pace could increase.

Best wishes,

Doc