11/19/14 was down -0.10 to 88.90. This, combined with the weakness in the ZZZs, has cut the premium of the ZZZs over the component to 1.10.

There was a little firmness in the 6-day moving average carcass weight this morning. It rose to 215,54#. That is only +2.77# yr/yr. Most of the firmness in the carcass weights came from heavier packer hogs. The percentage of packer hogs killed was at 32.3% and that is in line with what we usually see.

I am reluctant to take much of an out right position in this market although I did pull-off a few scalping trades in the ZZZs this morning from the long side.

I continue to feel that the USDA may have overstated the inventory of market hogs in the last H&P report. Since 9-1-14 that kill has been below the projected kill by about 210K. In addition to that, I think that producers have been liquidating a little back-log of heavy hog and this may have added an additional 400K of hog to the kill. I am anticipating that the USDA will revise the September inventory of market hogs downward by something between 300K and 600K when we get the next report.

Now that the carcass weight have fallen back to near the year ago levels, the lower kill rate has shrunk pork production. Last week the pork produced was 4.3% below the same week last year. That was not enough to enable packers to ramp up the prices for the primal cuts.

I believe there will be enough tightness in the supply of market ready hogs to cause packers to reverse course and begin bidding a little higher for hogs. I think traders got a little ahead of themselves and pushed the premium of the ZZZs over the index a little too soon. If the ZZZs revisit the 89 area, I think I will probe the long side.

Best wishes,

dhm