Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 22th 2004

Hog Markets
Cash prices for hogs continue to increase at a rate of $1.00/day. At this pace, the ISM and eventually the National Index to which the futures converge could hit $80 by the end of the week. The price increase so far this fall has been nothing less than phenomenal. For most of the year prices have been trading near the levels set in 1997 and 2001. Since early September the market has pushed even higher and is now well above the cash prices that prevailed in both 1997 and 2001. The last time the cash price was neat current levels in the fourth quarter was in 1996. That would make this year the second best year for hog prices since 1990!
Futures have hit new contract highs across the board over the past week. Yet, despite hitting new contract highs the Oct is still at a large discount to the cash market. So long as the Cot is at a discount, the board will need to add value. The market, therefore, has the potential to hit new contract highs and add more value so long as the cash can maintain or possibly improve its current value. The outlook continues to be good, and the Oct futures¹ contract will likely follow the same trend as the Feb, May, Jun, Jul and Aug contracts, all of which hit new contract highs in the month of expiry.

Feed Markets
Cash corn prices continued to drop and are now $1.17/bu below the highs of early April when Dec corn hit $3.30/bu. The recent lows have been triggered by good late season weather and forecast for favorable weather to continue for the rest of the week. The corn crop is now 85% dented down from the 5-year average of 94%. The weekly crop progress report also increased the crop condition, and now shows 70% of the crop rated good to excellent. The harvest is running later than normal with only 9% of the crop off, compared to 12% on average. The market is less concerned with the slower than average harvest, and is instead focusing on the impact of the favorable forecast on the year¹s late growing season. The trend remains lower in the grain markets as the harvest starts and will continue lower unless numbers start to come in lower than expected for yield.
Soymeal prices continue to move lower following the rest of the soy complex. The USDA added pressure to the market with its weekly crop progress showing improved overall crop conditions. The USDA now shows 64% of the crop in the good-to-excellent category. The bean harvest is ahead of schedule with 8% of the crop complete, ahead of 5% last year, and 6% for the 5-year average. The weather forecasts remain favorable, and will continue to add to the downward trend in price.