MURICO.com Forum

The final Purchase Index for - - -

2/6/15 was down -$1.34 again yesterday. Packers are really taking it off their bids right now. Even though packers were bidding lower, they were able to make a solid purchase of 115.2% of the moving average daily purchases. This has me thinking that producers are motivated sellers.

The model projects that the CME Lean Hog Index component on Friday's kill will drop between -0.85 and -1.15. This has been a mind-boggling down trend and there is no end in sight. If I were a producer, I would hedge a little more aggressively than usual.

The GGGs settled discounted to cash by -3.50 with 6-days data to cash settlement. That's enough time to close the "Gap" with a drop in the Index providing all the closure.

The limit up move in so many of the hog contracts on Friday seems to have been out of character with the hog fundamentals. At this point I am not sorry that I sold a couple Friday at limit.

Nearly all of the data points I look at are suggesting to me that we are in the expansion phase of the "Hog Cycle". Once we enter into the expansion phase, it generally takes a while to reach the production crest of the "Hog Cycle". When the "Hog Cycle" reaches its crest, producer losses are sufficiently high to produce the discouragement that will usher in the liquidation phase. I think it is time for me to polish up my spreadsheets so I have a feel for producers' level of profitability.

Best wishes,

dhm