Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for June 24th 2004

Hog Markets
The hog market continues to have strong prices despite the large kills. Over the past week the cutout and the cash were mostly steady, but the futures managed to post new contract highs in Aug, Oct and Dec. the biggest surprise through all of this is that the weekly slaughter is still running above year ago levels. The cash price of hogs has lost considerable value in the weeks leading up to the holiday so far this year. The next holiday is the 4th of July. Without a considerable premium in the cash over the futures, the futures would likely fall if the cash price falls ahead of the holiday. The impact of demand remains considerable in the hog market, prices are well above where supply would suggest. This Friday¹s Hogs & Pigs report will indicate what the supply of hogs is expected to be for the rest of the year. But, how important will this be when demand is such a large factor affecting the price of hogs. It is doubtful that this Hogs & Pigs report will have much of an impact at all on the market.

Grain Markets
Cash corn prices were further reduced this week as nearby futures traded to their lowest level in over 5 months dating back to Jan 12. Ample rains in the US Midwest have benefited this year¹s crop even though localized flooding has raised concern about final acres, which will be released on June 30th along with grain stocks. Good to excellent acres for corn were reported earlier this week at 70% down from 73% the week before. Lower corn values are expected for later this year however weather could provide volatility during the summer months.
The lows for summer soymeal appear to be behind us following the futures most recent break between May 12 and June 3 which pulled cash prices down $125.00 Cdn per mt/ Since the 3rd nearby July soymeal has recovered $63.00 due to the realization of shirt soybean supplies in the US. Also contributing to higher cash orices has been extreme narrowing of soymeal basis as crushers report firmer bean basis levels at the Gulf. China¹s decision to lift the ban on 23 Brazilian trade groups was viewed as positive to the market as export demand was reinstated. Fourth quarter soymeal and bean prices remain under pressure as beneficial weather continued to indicate the possibility of a large soybean crop for the 2004/05 season. Hog producers should lock in soymeal for the remainder of Jun-Sep at the market leaving Oct-Dec open to further price reductions.