12/13/19 WAS UP +0.71 and the model projects the component on Friday's kill will jump between +0.30 and +0.60. This is about the greatest disharmony I have seen between the afternoon Purchase Index and the final Purchase Index.

For some reason packers were really wanting hogs on Friday and with their higher late afternoon bids they got them - 164.5% of the moving average daily purchases of total hogs and 154.4% on the index hogs. The last we saw large Friday purchases like that was on 9/20/19 when packers were aggressively lowering their bids and producers were in a panic to get their hogs marketed before the price fell more. Now it appears that the worm has turned. Now packers are bidding higher wanting to get hogs lined up before the supply dwindles and the price rises even further. At least that is my read on the numbers.

The GGGs are trading premium to the component by +9.83. One year ago the gap was 8.76 and with the ASF problem in China, I thought we were headed higher - much higher. The thing I did not realize was the backyard producers in China were going to panic and undergo massive liquidation of their herds putting a lot of pork on the market and the problem was exacerbated by the trade war. When the dust settled and the GGGs went to cash settlement the index was at 55.02 virtually unchanged from from the 55.07 the index posted on 12/17/18. Needles to say I got bloodied up a good bit and my boat might have been swamped were it not for the steady cash income from the calendar spreads.

This year the scenario is far different. The backyard producers in China are mostly out of business and their production is lost probably never to return. The trade war may be winding down and with pork trading several times higher in China than in the USA, an increase in exports is a distinct possibility. Packers may be sensing that will happen and so they were aggressive buyers of hogs late Friday afternoon. As near as I can tell, packers were wanting to get hogs lined up ahead of a further jump in hog prices.

Best wishes,

Doc