2/3/2020 was down -0.03 to 61.09. The GGGs are now trading discount to the component by -4.34. The small jump in cutouts yesterday moved packers' gross margins up to $18.69/Index hogs. Packers' margins may be enough to keep packers from dropping their bids much more "I F" cutouts just stabilize at this level. So very much depends on exports!

And China being in lock-down poses a significant hurdle for exports to overcome.

The morning reports showed that packers were not buying negotiated hogs. This my put some producers of negotiated hogs out of business and it appears that packers are gearing up to increase their production to replace them. Packer hogs made up 40.5% of the 6-day moving average slaughter. Not only was the percentage of packer high but their weight was also +3.45# heavier than the non-packer hogs. The high packer kill rate may be suggesting that packers have finally decided to become more aggressive in moving their hogs out and backing up the negotiated hogs.

The 6-day moving average carcss weight eased to 216.24#. That is +0.96# yr/yr. Packer hogs are heavier than non-packer hogs by +3.455#.

We ARE still in the chase to find the next seasonality high for this year. We have been seeing an unusually high kill rate. With the data showing the carcass weights easing a little, it is possible that we will now see the kill rate begin to soften. Because of the biology of hog reproduction, there is a strong seasonal tendency for the kill to gradually slack off from now until summer with the seasonality high often coming about the 4th of July. Once the kill rate begins to soften, I will be watching carefully to see if there will be a significant re-bound in the summer futures to ofset the beating they have taken lately.

Best wishes,

Doc
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