8/28/19 was down -0.55 and the model projects the component on yesterday's kill will drop between -0.75 and -1.05. The VVVs settled discount to the component by -8.78. Bellies took another pounding yesterday and that pulled the cutouts down -2.06. If packers can't sell the product, they have to lower their bid prices. And that is exactly what they are doing and the belly-drop most likely will trigger more price cutting by the packers.

With their lower bids yesterday packers purchased 82.5% of the moving average daily purchases of total hogs and 86.9% on the total hogs. When we get the final Purchase Index tomorrow morning, I am expecting it to be even lower. My thoughts are that producers are becoming highly motivated sellers and this will enable packers to gather-in the hogs they need at a lower price yesterday afternoon. Of course packers are needing to lower their cost of pork. The model calculates that packers' margins have once emore fallen in the red and their gross margins are -$0.56 per index hog.

This is the time of the year when hog prices go into a slump. "The Market" is saying that we will hit the seasonality low about the time the December hogs go to cash settlement and we will be in the low 60s. Last year on this date the CME Lean Hog Index had fallen to 46.45 and by the time the VVVs went to cash settlement it had rallied to 68.75 only to fall to 55.13 when the ZZZs went to cash settlement. Last year we had a very early seasonality low at 45.30 on 9/3/18. I have been thinking that is also the Hog Cycle low however it is beginning to look possible to creep below 45.30 this year if demand does not come alive. We do know that we are searching for the seasonality low having posted the CME Lean Hog Index seasonality high at 84.68 on 8/2/19.

Best wishes,

Doc