8/29/19 was down a WHOOPING -1.97. Packers are intending to fix their margin problem! A couple of weeks ago it was $19.87/index hog now it has fallen to $2.76/index hog. The model projects the component on yesterday's kill will drop be weem -1.15 and -1.45. If traders try to get flat for the holiday weekend and it is the bulls and not the hedgers who want out, there could be some selling pressure develop toward the end of trading today so I piled more short VVV pigs on my boat. Also added a long K/M spread at -4.20. On average over the past eight years the K/M spread has gone to cash settlement at -4.80 so this is just a volatility trade to test the market.

With their sharply lower bid packers were able to purchase 89.56% of the daily moving average of total hogs and 96.3% on the index hogs. Producers of index hogs may be rather willing sellers as they watch the index tumble lower.

The VVVs are now trading discount to the component by -6.21. Looking at the way packers are slashing their bids, I suppose it is possible for the index to fall enough to push the VVVs down a little by the time we go to cash settlement.

Best wishes,

Doc