MURICO.com Forum

The afternoon Purchase Index for - - -

8/9/19 was down -0.55 and the model projects the component on Friday's kill will fall between -0.30 and -0.60. The QQQs settled discount to the component by -3.07. The model calculates that the component will need to drop by an average of -0.87 per day to close that "Gap". The component has dropped an average of -0.55/ day over the past five-days. If the component continues to drop at the rate of -0.55/day, the QQQs will go to cash settlement at 80.18.

But the component may not continue to drop.

I say that because cutouts posted a gain of +1.75 on Friday. That is an "Industrial Strength" gain and the model calculates that it pushed packers' margins up to $17.45 per hog. With margins like that, packers may compete with each other to see who gets to kill the hogs. The kill this week came in at a paltry +0.56% over the same week last year. Not only was the kill down, but the 6-day moving average carcass weight was -0.32# under the same period last year suggesting producers are very current in their shipments. It seems to be the packers that are especially current in their shipments. Packer hogs are -1.20# lighter than the non-packer hogs. Not long ago packer hogs were almost 5# heavier than the non-packer hogs.

If packers have hurried some of their hogs to market to beat the fall price decline, they may have done it a bit too soon.

By the time the afternoon reports were released, packers had purchased 95.9% of the moving average daily purchases of total hogs and 102.4% on the index hogs. These percentages usually run in the 120% range on Fridays. This makes me think that packers will have been wanting quite a few more hogs Friday afternoon and the strong pork sales would have put a little "Jingle" in their pockets so they could have sweetened their bids.

I hope my sharing with you the numbers from the model, some of you were comfortable in joining me with long QQQs in your hog trading accounts. I post because my trading seems to go better if I take the time to study the hog fundamentals in sufficient detail to make these posts.

Best wishes,

Doc