Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for December 3rd, 2004

Hog Markets
For most of the summer the price of hogs this year was similar to the price in 1997, which was the highest price of the last 8 years. This relationship no longer held true after the end of September. Up to that point, slaughter was averaging 3% higher than a year ago and prices were similar to those in 1997. Since the end of September, slaughter has been 1.2% below last year and prices have been well above those experienced in 1997. The last time prices were at their current level in November was in 1996. The strong cash market for hogs is expected to continue neat its current price until the end of the year. Slaughter is expected to continue below last year¹s level until the end of the year, and demand for hogs should continue to be robust.
The futures market has found strength in the smaller slaughter and strong cash market for hogs ­ at the start of the week we are at new contract highs in every contract. From December of 2004 through December of 2006, every contract is sitting at its highest price to date. The futures market is offering better prices for the entire year of 005 that the actual cash prices has been most years, yet it is still not overvalued. So long as demand remains strong, cash priced could still be higher than the current futures prices for early 2005.

Feed Markets
Meal prices cropped slightly in the past week after rising off of lows earlier in the month. The mildly lower tone to meal can be partially attributed to new contract lows in corn and good weather in Brazil. Favorable weather to start the season in Brazil pulled the entire soy complex lower over the past week. The lower tone of the positive weather was enhanced by a private report that Brazil producers have only sold 14% of the 04/05 crop, compared to 46% sold by this time last year.
December corn futures moved to new contract lows yesterday, amid heavy deliveries on first notice day. Fundamentally corn is under pressure based on expectations for the next Supply and Demand report. The USDA is expected to revise China¹s corn production higher and lower US corn exports. Exports have been lost in recent weeks to China who has been underselling US corn. Technicals are indicating an oversold position in corn, but it will be difficult to put in a low so long as China is exporting