Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for June 16th 2004

The hog price continues to be well above last year's level with the ISM 16% higher and the NBC 18% higher than last year. At the same time, slaughter is 3.2% above a year ago this last week and year to date is running 2.3% higher. This unusual market continues to be fueled by strong demand that has pushed prices higher month after month since the beginning of the year. The ongoing exception to the strong prices have been short weeks. Cash prices have lost nearly 10% of their value in the weeks preceding holidays.The August contract has traded within a $1-2.00 of the June and July contracts for much of the past two months. Only in three of the past 16 years has the Aug contract expired higher than the Jul contract. In the other 13 years it either expired steady to or lower than the July contract. For the past two years, the cash price has fallen sharply in the second half of Aug when weekly slaughter number approached 1.9 million head per week. With this year's larger slaughter, prices could fall earlier in the month.

Grain Markets
A sharp sell-off in corn futures late last week drove cash prices to their lowest level since Feb 9, 2004. Weakness came after the USDA pegged world ending stocks for the 2004-05 season at 68.86 million tons compared to 66.80 million last month. Ending stocks for the US were in line with the previous month estimated at 806 million bushels for the end of this marketing year, while average trade estimates were closer to 835 million. Crop conditions improved slightly over the previous week with 70% of the corn in the good-excellent category up 2%, which was expected. Availability of cash corn across the US Midwest is beginning to tighten with good demand. Basis levels have narrowed due to the potential shortages that may arise over the next couple of months. Coverage for old crop should be taken on the most recent slide in spot pricesCash soymeal prices have recovered slightly from the lows of last week. Strong domestic and export demand for meal has supported the July futures, which posted $10.00 US gains this week. NOPA crush reported for the month of May offered good support to the market to start the week as estimates totaled 109.9 million bushels compared to earlier estimates of 107.0 million. New crop soybean and meal prices have not been lifted like the nearby contracts, as increased soybean acres are believed to have been planted with the recent flooding of corn acres. Acre estimates from the US to be released Jun 30th will provide direction to the market based on new production estimates.