10/1/19 was down -1.07 to 60.47. That was quite a hair-cut the component suffered on Friday's kill. The ZZZs settled premium to the component by +4.05. Maybe there were enough traders aware of the fact that cutouts were very strong (being up +3.11) to keep the ZZZs at a strong premium to the component. The model calculates that packers' margins were a rather attractive +$39.41/index hog. That sent packers out buying hogs yesterday morning with the total purchases by the time the afternoon report came out at 120.3% of the moving average daily purchases of total hogs and 118.1% on the index hogs. Those are very high number for a Monday.

The six-day moving average carcass weight firmed to 214.52#. That is +1.97# yr/yr. Since 10/14/19 the 6-day moving average carcass weights have jumped +2.27#. That may mean producers are getting behind a little in their shipments or it may mean hogs are finishing more quickly with cool weather and fresh corn. In looking at the kill since 9/1/19, it is almost exactly the same as projected from the last H&P Report so it may be rapid hog growth that has firmed the carcass weights.

Packer hogs are -0.67# lighter than the non-packer hogs so packers seem to be very current in their shipments and they are still shipping about 40% of the kill mix. Sometimes when packers keep very current in their shipments it foretells some weakness to come in the CME Lean Hog Index. If the jump in the cutouts is hinting that demand is moving up, that will keep packers bidding firm. All indications are that world pork supplies are tight because of the disease in China. The price of pork is two to three times higher in China than in the U.S.A. suggesting there is room for the price of pork here to move up if trade were to be allowed to move freely.

I am still long hog futures and it is not working out very well and pre-opening is suggesting the ZZZs will be taken down a notch again today. I still think the seasonality low has been posted and we are now in for a long, long search for the next seasonality high in the CME Lean Hog Index. That may take months and months to find. It usually shows up around Independence Day.

Best wishes,

Doc