Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for May 10th, 2005

Hog Markets
Kill cutbacks due to fewer hogs is the main story of the week causing plant shut downs. Sourcing hogs has become an issue mainly in the eastern cornbelt causing 3 plants to go dark. Cash prices rallied late last week to over $80 US per cwt but have lost about $4 since Thursday’s top. With fewer animals being slaughtered cut-out values should be supported by less amount of pork hitting the market.
Futures weakened to trade below the current cash resulting in a counter seasonal inverted basis. Summer contracts are being discounted as the market anticipates a slide in cash prices due to poor packer margins. Lean hog futures for the last quarter of 2005 remain range bound and within $1.50 of contract highs.

Feed Markets
Following losses early last week, soybean and soymeal prices have since climbed to trade steady with a week ago. Strength in the Canadian dollar led to slightly better cash prices in Canada after dropping below 80.00 cents US a week ago. Planting progress has picked up and is currently at 26%, slightly above the five year average but below the 30-35% that was expected in this weeks report. The South American harvest is in it’s later stages as the Brazilian production numbers continue to be revised slightly lower, while on the opposite end the Argentine crop is coming in very positive and well ahead of last years pace. The mixed signals have had the market trading within a range over the last few weeks, failing to establish a direction.
After setting new contract lows for two consecutive days early last week, the corn market has bounced up slightly but is still trading around the $2.00 US per bushel. Planting continues to be moving along quickly at 79% complete as of May 8th which is well above the average of 67%. The early planting increases the likelihood of seeing above trend line yields. Between the new crop projections and the continued old crop supply the futures are struggling to find any level of support. The market continues to build its large net short position but it will take some bullish fundamental news before any significant short covering takes place.