11/29/19 was DOWN -1.14 TO 56.97. That was quite a surprise considering the strength in the Purchase INdex. Packers had a bunch of cheaper hogs, especially the negotiated hogs, that they ran through their plants on Friday and that really trashed the component.

The hogs must have had a great Thanksgiving dinner because the six-day moving average carcass weight jumped to 216.22# That is +1.84# yr/yr. Index hogs were also heavier at 214.21#. Quite a bit of the weight gain was in packer hogs. They are now +1.81#heavier than the non-packer hogs. The percentage of packer hogs in the kill mix has now fallen to 38.8%. On 11/1/19 the percentage was 40.9% packer hogs, Does the fact that packers seem to be holding their hogs back and killing them at a heavier weight while buying and killing cheaper hogs give us a clue relative to where packers think the price of hogs is headed??

The model calculates the Packers' gross margins are +$55.78/Index hog. That seems to me to be a rather favorable spread for the packers. Maybe that is why packers were buying hogs aggressively Friday afternoon and holding their hogs.

The ZZZs settled premium to the component by 3.38. That is quite a "Gap" with only ten more days of data to get to cash settlement. The drop in the component on Friday's kill puts the seasonality low into play since the component is only 2.31 above the low of 54.67 set on 9/24/19. With the primal cuts posting a gain of +1.87 on Friday and another +1.01 on Monday, there is reason to suspect demand is quite good. The demand surge associated with the Thanksgiving day holiday is now behind us and it would not have been surprising to see a mild let-up in demand rather than the increase that we got.

And there is another thing -

Very shortly packers will be filling the pipeline for the surge in demand for the up-coming Christmas and New Years Day holidays. Generally the CME Lean Hog Index remains steady between the first of December and when the ZZZs go to cash settlement but sometimes it spikes upward five or six points. My guess is that the index will be steady to firm this year. I feel that way because packers seem to be holding their hogs back and letting them add a few extra pounds while they load the chains with purchased hogs.

Best wishes,

Doc .