Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 19th, 2004

Hog Markets
Cash hog prices have continued to rise over the past week in an unseasonal movement higher. Prices gave historically fallen in the month of November, ahead of Thanksgiving. This year both the cash and cutout have increased in value amid strong demand and a smaller supply of market hogs. Both the cash and the cutout have increased by nearly $3.00 over the past week, keeping packer margins steady amid higher hog prices.
The strong hog prices so far this year has been mainly due to exceptional demand; but a smaller supply over the past few weeks has started to contribute to price as well. Last week¹s slaughter was 5% below the same week last year. This was the third consecutive week of smaller slaughter. Year-to-date, however, slaughter us running 2.7% greater than last year. The recent drop in supply, along with continued strong demand has pushed prices to a level not seen since 1996. The smaller slaughter is expected to continue to early 2005, yielding some of the best ever fourth quarter prices for hogs.

Feed Markets
The price of corn moved sharply higher over the past week, following soybeans higher. The corn market, despite higher prices this week, continues to trade near contract lows in Dec just under 42.00/bu. The focus of the market will be exports in the months ahead. For the most recent week, sales were 43% below the previous week and 36% below the four-week average. Unless exports are able to make a significant increase, it will be difficult for corn to come off its lows.
The general trend for soymeal has been lower since early May of this year. Over the past six and one half months, the Dec meal contract has dropped by 39%! Concerns in the meal complex arose last week when Asian rust was detected for the first time in the US. The USDA estimates that this could have a significant impact on US bean production in the years to come. Over the short term, however, it may prove to be positive for lower meal prices. The fear of rust could result in fewer bean exports, and more domestic crush.