Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 27th, 2004

Hog Markets
Cash hogs over the past week climbed steadily as packers were forced to increase bids to keep supplied coming. A higher price last week is not usual. Looking back over the past 14 years, the price rose last week about half of the time. If the cash price continued to move higher this week, it will be an oddity. It will be only 2nd time in the last 14 years that prices moved higher in the last week of October. The only other year was 1999.
Lean hog futures fell hard on Monday of this week, in response to negative information over the weekend. The US government announced that it may be close to shipping beef to Japan again. The USDA also released it¹s monthly cold storage report last Friday. Total meat in cold storage increased in the month of September for beef, poultry and pork. Futures prices have since made back most of the losses as strong cash fundamentals support prices. The December contract is at a record discount to the cash. This is a similar trend to what has happened most of this year. With the exception of the April and the Oct contracts, all others have expired near contract highs. If the cash price remains steady to higher, the Dec contract can be expected to move back higher to near contract highs.

Feed Markets
Corn harvest in the US progressed to 55% complete versus 44% last week but remains week behind last year¹s pace of 67%. Increasing cattle-on-feed numbers reported Friday were at the top end of industry estimates supporting the corn market on forecasts of strong demand for 2005. News that Japan and the US have come to an interim agreement to resume beef trade some time in 2005 was also supportive to cash corn. Limited new market information is expected to hold futures and cash prices steady for the week ahead barring any major changes to current weather patterns.
Spot soymeal increased this week as futures traded higher in an attempt to establish a harvest low with 80% of the soybean crop now harvested in the US. Production numbers in the US remain steady with last months estimate however strong export numbers and improving domestic demand provided the support seen in the market. Rises in the cash were slowed by a surge in the Canadian dollar, which traded to 12-year highs surpassing 82.00 cents US. Slow producer selling of soybeans due to depressed cash prices have resulted in tightening meal basis adding to the week¹s climb in cash. Forward contract soymeal prices for 2005 remain at historically low levels because of depressed meal futures and the strong Canadian dollar.