1/30/15 was down -0.69 to 70.79. The limit down move yesterday and the mild weakness today has dropped the GGGs to a discount of -2.62 to the component. Traders are thinking that the down trend in the CME Index has a ways further to go. I think they are probably right because we appear to be in the expansion phase of the hog cycle and expansion phases often run for several months.

The six-day moving average carcass weight moved up to 216.65# this morning. That is +3.15# yr/yr. The weather may be cold enough to slow growth a little so this may be a hint that producers are mildly behind in their shipments. If I were a producer, I think I would want to be current as I look at the data.

It is especially the packer hogs that are getting heavy. All of the increase in carcass weight today was the result of heavy packer hogs. The non-packer hogs were actually a bit lighter. Also the 5-day moving average percentage of the kill that was packer hogs moved up to 34.1%. I might be wrong, but this has me thinking that packers have expanded production somewhat more than the non-packers. Perhaps when they were short of hogs last year due to the PED virus problem, they decided to keep more sows to make sure they had hogs to kill this year.

The kill so far this week is running +9.97% over the same week last year. The expansion may have been overdone and by the time we get to the crest of production, it may be necessary for prices to work quite a bit lower in order to move all the product.

I have added two more short GGGs, a short KKK and a short MMM.

Being long during the expansion phase of the hog cycle may be the wrong side of the market.

Best wishes,

dhm

was up to up to suggest