8/2/19 WAS DOWN -0.47 and the model projects the component on Friday's kill will be up between +0.10 and +0.40. Packers probably still have enough more expensive hogs purchased to keep the Index firm. The QQQs settled discount to the component by -8.55. The model calculates that the component will need to drop an average of -1.01 to close the "Gap". If the component on Friday's kill moves up, say +0.20, then the component will need to drop an average of -1.17 per day to close the "Gap". Obviously "The Market" thinks packers are going to be letting the air our of their bids in a big, B I G way.

And they just might.

After all we have now posted a seasonality high and after the high comes the low, but the high may be even a bit higher, we just don't know.

Here are a couple of things we do know:

1. Producers have expanded production beyond the needs/wants of the domestic market.

2. To move this high pork production, about 25% of it needs to be exported.

3. China has lost a lot of hogs but we don't know how many; it may be far more than we have.

4. We have a trade war going on that is not conducive to free and open export trade.

By the time the afternoon reports were released, packers had purchased 95.4% of the moving average daily purchases of total hogs and 104.6% on the index hogs. Generally on Fridays these percentages are in the 120% range so we have reason to believe there will have been quite a few more hogs purchased Friday afternoon. We don't know whether producers will have caved in and sold at lower prices or whether packer will have had to sweeten their bids to bring in the hogs.

The kill last week was lower than projected from the last H&P report but the prior week was a monster kill week. Since 6/1/19 the kill has been in line with the last H&P Report.
higher. This suggests to me that the last H&P report was a good report and we can expect the kill going forward to be in line with projections with a gain of slightly more than 3% over the previous year.

Best wishes,

Doc