10/30/19 was down -0.28 and the model projects the component on yesterday's kill will shed between -0.30 and -0.60. Packers had a little trouble selling all the pork they produced and cutouts took quite a hair-cut dipping -1.28 being led lower by loins, hams and bellies. The model calculates that packers gross margins dropped to $26.80/index hogs. Packers responded, as noted above, by taking their bid prices lower. Hog traders had a mild case of bullish euphoria yesterday and drove the ZZZs up premium to the component by +2.94 at the close.
That may be a realistic premium for the ZZZs to carry over the component if hogs are being pulled forward a little as the numbers seem to indicate and if the last H&P Report was fairly accurate - - -
When traders come to grips with the fact that cutouts faltered and packers took something off their bid prices, I expect traders will re-think what they have done and take the ZZZs back down a notch or two. Squaring up for the end of the month may add a little downward pressure on the hog futures today, also.
Yesterday I was able to scalp a few ZZZs that added a little to my margin. Stacking calendar spreads on my boat and getting some off kept me quite busy. Fortunately flipping quite a few calendar spreads is cushioning the hit I am taking from being long some ZZZs.