As I write this, we have a positive basis of +$10.00! I do not know if I have ever seen that for this time of year. When I was a hog buyer, I charted that basis, it was a predictable tool to indicate market direction. When actual basis has the cash price higher than the futures, they will come together.

What will give?

In my opinion, information out of China that they have an oversupply of pork and drove their domestic hog price down caused the American futures to fall in sympathy. By the way, China is not being factual in that news release. So, fundamentally what will bring the basis together? Well, we only have the facts:

• PRRS 144 is a real problem. This is not a PRRS variant that the vets are able to really get under control and bring herds back to stable. I have heard of 25,000 sows that the vests finally gave up on and are depoping everything to try to get it under control. When the vets are admitting defeat to PRRS144 we have a problem.
• Feed cost and building cost have expansion at a standstill. Finishers are for rent everywhere.

Packers are losing money and still chasing hogs on the open market, and it is a summer market.

Futures will be higher!

All this facts tell me the drop in futures over the last two weeks was not only overdone but unnecessary. The positive basis is proving my theory. Cash will pull futures back to levels we had three weeks ago. The packer I worked for in the past has always made me write on the bottom of my commentary that these are my opinions and not theirs. So, I will add that here. IN MY OPINION cash will remain strong and hog futures will turn higher. Watch the basis.