Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for March 8th, 2005

Hog Markets
Cash hog prices advanced $4.00 US on surprisingly strong demand for live hogs. Margins have moved into negative territory for the packers with the recent climb in cash, however expectations for higher meat values have them aggressively sourcing hogs. A drop in cash ahead of Easter should not be ruled out with expectations for a full recovery once into April.
Lean hog futures traded through contract highs in all months from May through Dec. Support during mid week came from news that the US border would remain closed to Canadian live cattle due to a ruling made by a Montana judge supporting a full hearing between R-Calf and the USDA. News from Washington D.C. released yesterday reduced the tariff on live hogs being exported from Canada to 10.63% down from the initial 14.06%. Final ruling from the ITC whether the tariff will remain in place or be removed entirely is expected in about a month.

Feed Markets
Short covering which sparked the recent up swing in corn futures has dried up with even some recent fund selling seen in the market. This lack of buying along with technical pressure has sent futures down for five consecutive days. With a 50 million bushel increase in ending stocks expected in Thursday’s supply/demand report, coupled with weakness in the soybean market, a further trend lower in the cash and futures market is likely. As US planting nears expect another opportunity for moderate weather premiums as seen with the South American crop.
Following four weeks of higher soymeal futures a near term top in the market may have passed. Over the past week Argentina has received ample rains and has raised production estimates by 2-3 mmt. This will make up some of the losses in Brazil who have lowered their estimates but are still well above last year’s record crop. There is a sense that the market has already priced in the Brazilian production decrease and attention is starting to shift back to the burdensome world stocks. Long liquidation from the funds continues in the market. Along with the lower soymeal futures, a basis improvement for deliveries to Canada has sent spot soymeal prices lower for the first time since early February.