numbers are the four USDA hog Purchase reports that come out about 3:30 PM each day and the follow up reports at about 9:00 AM the next morning. I merely collect the number of hogs the USDA reports as having been purchased, segregate them into the index and non-index hogs and calculate the current day's purchase as a percentage of the running average five-day purchases. I use five-days because that is the number of business days in a week. I calculate percentages rather than actual numbers because there is so much variation in the actual numbers depending on the season of the year.

From the same reports I use the CME Lean Hog Index calculation formula but substitute "Purchase Data" for "Kill Data" giving me a "Purchase Index". Since these reports do not give carcass weights, the best I can do is substitute the previous day's kill weights. I then weight the daily change in the Purchase Index over the previous 14-days because that is how long the USDA accumulates hog numbers in the SWINE SCHEDULED FOR DELIVERY TO PACKING PLANTS FOR SLAUGHTER section of these reports. The more recent purchases are given a much higher weighting. This weighted projected change is then "Gapped" with a 0.30 spread up or down depending on whether hog prices are trending up or trending down.

In spite of the fact that these calculations are rather simplistic and crude, I continue to be impressed with the very high degree of correlation there is between the projections and the actual changes the CME reports a day or so later.

As I am sure you realize, there is essentially no correlation between changes in the CME Lean Hog Index today and what will happen to the deferred contracts such as the QQQs for instance. However when the front month gets close to expiring, I find this to be a handy trading tool to keep me on the right side of the market going into cash settlement.

Thanks for your questions, Du Rock, and interest in my Hog Pricing Model.

To quote Farmer Ed, "I talk hogs much better than I trade them!"

Best wishes,

Doc