Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for December 23rd, 2004

Hog Markets
Slaughter for the past week was slightly larger than the same week a year ago (+2%). This is the first time in eight weeks that packers were able to kill more than they did more than they did last year. Expectations are that we will continue killing more hogs that we did a year ago going forward. For the next two weeks, Christmas and New Year's day fall on feekends, and a slightly larger sow herd should push slaughter numbers higher for the rest of 2004 and into the New Year.

Cash prices have declined sharply for the past three week's, but the futures market has not been overly concerned. The lower cash price had been contrasted with only losses in the cutout. This has led to expectations of a strong rally in the cash once the holidays are behind us. A strong rally in January would be supportive not only to the nearby Feb contarct but to the rest of the board as well. The USDA releases its quarterly Hogs & Pigs report next Tuesday. Early expectations are for moderate expansion in both breeding herd and market hog number.

Feed Markets
Overall weakness in the corn market continues with funds holding a record net short position of over 107,000 contracts. Short covering could be the spark that leads to a surge in prices but with no major indicators that would suggest a move higher, the current trend looks to continue. Weak exports versus last year's prace, and good growing weather in South America have added to the lack of support to the futures market. Hog producers can benefit from lower prices by purchasing corn in the spot market versus buying well out into 2005.

Cash soymeal was reported higher in the US over the week but delivered prices into Canada were actually lower due to losses in the nearby Mar futures and a steady Canadian dollar. Availability of supplies is expected to provide an underlying floor to the meal market in the weeks ahead as main Midwest crushers report shortages due to slow producers selling of soybeans. Basis was unchanged throughout the week but could be vulnerable to futher tightening, as supplies become scare heading into two holiday weeks.