2/2/15 was down -$0.17 and the model projects that the CME Index component on the 2/2/15 kill will drop between -0.25 and -0.55. That is not quite as much weakness as projected from the afternoon reports but it does keep the down trend in tact.

From 12/1/14 until 1/17/15 the kill rate was tracking quite nicely with the projections from the last H&P report. Now the kill has escalated enough to cause me to believe that we are now in the expansion phase of the Hog Cycle. Generally the "Expansion Phase" will last until producers are losing so much money that they become discouraged and begin the "Liquidation Phase" of the Hog Cycle. It appears to me that cheap feed still has producers operating profitably so the dynamics seem to be in place for this "Expansion Phase" to run for a while.

If the supply of pork continues to build, I'm expecting the MMMs to suffer about as much decline from their late December highs as the GGGs have now suffered. If that turns out to be correct, there is a three to four point more decline in store for the MMMs.

With the GGGs being discounted to the component by -3.42, they may be nearly appropriately priced to go to cash settlement in eight more business days. Oh, traders will jump them up and down a good bit and I will be there with them seeking some scalping trades. Mostly I will be wanting to sell rallies and then buy the dip. I have pulled off two of those scalps this morning.

The Q/V spread is trading around 10.00. The late winter/early spring pig crop has the potential of being a nice one. This could cause some weakness in the VVVs so I am buying the spread with a target of about 15.00.

Best wishes,

dhm