2/10/2020 was down -1.11 to 58.03. The GGGs settled discount to the component by -1.83. With cutouts being up a little, packers' gross margins recovered to +$13.60/index hog. That is hardly enough to get packers very excited about sweetening what they will pay for hogs. They seem to be getting plenty of hogs by bidding lower and lower. The kill today was 12.98% greater than it was on this date one-year ago.
The 6-day moving average carcass weight was up a little at 216.64#. That is +1.09# yr/yr. Index hogs were steady at 214.03#. Packer hogs were +3.99# heavier than the non-packer hogs. There is no hint yet that the seasonal decline in the kill rate is about to begin. It might be that the high kill we are seeing now is pulling hogs forward as producers are being over-come by discouragement and bleeding red-ink but it is not showing up in the numbers yet. In fact the numbers seem to be suggesting the USDA was wrong in their last H&P Report. The way I look at the last H&P Report, we should be working on the 120# to 179# category and the USDA PEGGED them +4.56% over last year.
Last week the kill was +7.17% and The week before it was +13.95%!! The USDA has been doing a fairly good job counting hogs but these numbers are way off. If it represents hogs being pulled forward, there is going to be some drop in the kill rate in six to eight weeks when the under 50# category begins to come to market. There will be another H&P Report by then and it may straighten the numbers out.
At any rate, I am still short the GGGs and long summer futures. I have some long J/K spreads on my boat that are beginning to get moldy. I may have to dump them off and let the sharks have them. Today I flipped a couple of long Q/V spreads. It is not often that I get to put a spread on and take it to the bank the same day.
Best wishes,
Doc