Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for August 25th 2004

Hog Markets
Cash hog prices fell early last week amid strong numbers, but leveled off once packers decided to add a Saturday kill. With the Saturday kill, weekly slaughter totaled 2.025 million head, 7.9% above the same week last year. The large kill is representative not only of the large hog supply that we have seen since the beginning of the year, but also the demand for hogs that has pushed packers to add a Saturday kill last week.
The July Cold Storage report reduced pork inventories from the previous month and showed them to be 16% below last July¹s inventories. Ham inventories are at their smallest ³end of July² total since 1996, and bellies are at their lowest ³end of July² inventory since 1975. The only negative information was about beef in the Cold Storage report. Beef inventories posted strong gains on the month and are 14.8% above year ago levels, even though cattle slaughter was small this July.
Lean hog futures continue to trade at a large discount to the cash. This is similar to what has occurred all year so far. Futures have been at a discount to the cash for most of 2004, and have hit contract highs shortly before expiry. This has made it difficult for short hedgers to make money. The market has rewarded people who kept their hogs in the cash market.

Feed Markets
Reports of frost across regions of the US Midwest, Northern plains and Canadian prairies spurred speculative buying and short covering supporting new crop corn futures. Quality issues were raised following this weekend¹s frost as the maturity of corn crops remain well below seasonal averages. Estimated corn production for 2004/05 reported by the USDA at the beginning of August was challenged by private crop tours in the US, which downgraded both corn and soybean crops on concerns for crop maturity. Historically large production numbers remain highly possible this year however the market appears less likely to take it for granted. Hog producers can expect small premiums in the months ahead of harvest unless further weather complications arise.
Another week of higher cash meal prices were lead by rallying soybean futures, which supported the products (meal and oil) on concerns of availability. Basis levels remain historically narrow for this time of year due to crushers concerns over what will be sold in the months leading to harvest. New crop meal prices traded above the near-term lows for the majority of the week but remain within $15.00 US of those prices/ End users of meal should consider pricing product for the next 2 months at the market while leaving the majority of 2005 requirements open to a return of prices to the recent lows.