9/6/19 was down -1.02 and the Hog Pricing Model projects the component on Friday's kill will drop between -0.80 and -1.10. Packers were a bit more successful peddling pork Friday and they were able to nudge the cutouts up +1.36. But they only sold 201.16 cars of pork and 26.6 of trim so a little bit of pork may being backed up. With the cutouts up and the cost of pork down, the model calculates that packers' gross margins moved up to $18.96/index hog.

With their lower bids, packers had purchased 102.9% of the moving average daily purchases of total hogs and 89.2% on the index hogs by the time the afternoon reports were released. Usually Friday's purchases run in the 120% range. So packers may have been busy Friday afternoon buying hogs. Both the CME Lean Hog Index and the Purchase Index are in strong down trends so I will be surprised if they were bidding higher in the afternoon; rather I think they may have taken a little more off their bids. We will know early Monday morning when we get the final Purchase Index for Friday.

There is about a 22% price differential between the price producers of "Negotiated" hogs are getting and that which producers of "Pork Market Formula" hogs receive. This may be enough to put some of the "Negotiated" producers out of business. Packers have been increasing their percentage of the daily kill and this may explain who is and will be continuing to lose ground.

The chase for the seasonality low for this year continues. Since it generally comes along about the time the ZZZs go to cash settlement, I look at their pricing as an indicator of what "The Market" thinks. Currently the ZZZs are at 62.475 so "The Market" blinked Friday and decided the price of hogs is going to topple a little by the time we get to cash settlement for the ZZZs. We have every reason to believe that come Monday morning when the 201 report comes out we will see the CME Lean Hog Index continue its march down hill.

But -

We often see a Monday morning bounce following a Friday limit down move. So I covered some of the short VVVs at limit and also bought an MMM pig and an NNN pig as scalpers looking for that Monday morning bounce which may or may not come. I am wanting to pile a few more Q/V spreads onto my boat to re-load those that have gone to the bank. My orders are at the 10.50 level but piled one on at the close at 12.475 because 10.50 may not happen.

The Hog Cycle low of 45.30 set on 9/3/18 is holding firm without being threatened this fall. This makes me think we are on the march looking for the next "Crest" to this Hog Cycle. It may be a long march with projections suggesting it may take China as much as five years to get their production back to pre-ASF days. And there is this matter of a "Trade War" to contend with. The last "Crest" to the Hog Cycle was on 7/16/14 when the CME Lean Hog Index touched 134.17. World hog numbers would seem to point to that as a possibility but a
totalitarian government like China can impose price ceilings and rationing to control consumption. It is being reported that some variations of this are now being used in some areas of China. So we wait and watch to see what will be at the heart of this unknown cabbage as we peel the leaves off one-by-one over the next couple of years.

I am HODLing a few QQQs in case an explosive move begins to set-in and trying to scalp a few deferred futures by buying dips and selling rallies.

Best wishes,

Doc