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The CME Lean Hog Index component on the kill for -

10/14/19 was up +0.85 to 63.46. This is the other 50% of the cash settlement index for the VVVs and the model calculates that the cash settlement index will be 62.92. Once again the Hog Pricing Model kept me on the right side of the market to go to cash settlement. The surge in the CME Lean Hog Index the last couple of days before expiry took a lot of the "Bloom" of the short VVVs but at least it was a winner and not a loser.

The afternoon Purchase Index on the hogs packers purchased by the time the afternoon reports were released was up +0.73. The model projects the component on yesterday's kill will be up between +0.40 and +0.70. The shortage of pork in China finally seems to be having an impact on the price of hogs in the USA. The low of 54.67 in the CME Lean Hog Index set on 9/24/19 looks more and more like it is going to be the "Seasonality Low" for this year. So we are not only in the chase for the next Seasonality High" but also for the next "Hog Cycle" high. The low for this "Hog Cycle" was posted on 9/3/18 at 45.30 and the last "Hog Cycle" high was 134.17 posted on 7/16/2014.

It is reported that China's Consumer Price Index rose 3.0% in September driven by a 69% rise in the price of pork. This may make Xi a bit more willing to make a deal with Trump. We know the last "Hog Cycle" high was the result of a disease driven shortage of pork in the USA. The number of hogs being lost in China is probably far greater than our 2014 losses. If we are to see our hog prices move up 69% to match the gains seen in China, the model projects the 2020 futures may move up to 107 level. Perhaps it is time to pile a few more summer futures on my boat to HODL.

The six-day moving average carcass weight has now moved up to 212.25#. That is +1.56# yr/yr. I don't think this means producers are falling behind in their shipments, rather it means packers are wanting to process heavier hogs.

Best wishes,

Doc