Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for July 12th, 2005

Hog Markets
Both cash hog and futures prices have been trending higher since the USDA’s Hogs & Pigs report two weeks ago. The futures have outpaced the cash, especially in the Oct and Dec contracts where fewer animals are expected than last year. Moderate gains in the cash market have occurred as packers have found supplies tighter than expected. However, the gains are being moderated by cutout values, which have shown only limited upside.
Unless cutout values can increase this week or next, we would expect to see the cash price for hogs start to slip. It would be difficult for future contracts to maintain their current values if the cash market starts to fall. The Oct contract has shown the most strength over the past week, and if the cash hog prices start to fall, the Oct would probably have more downside than the other futures.

Feed Markets
Soymeal futures traded major swings in both directions over the past week with talk of rain pressuring while Asian rust and dry conditions supported prices. Availability of cash soymeal appears to be slowing as crushers south of the border announce cutbacks due to low soybean stocks. Many crushers have indicated supplies will likely tighten into the end of the marketing year indicating producers not yet covered during the time period ahead of US harvest should consider some coverage. Soymeal prices for 2006 now trade below the 10 year average but nearly $50.00 per mt above the lows of the past season. Coverage for 2006 should be considered on any drop from this point as growing conditions continue to deteriorate for the US soybean crop.
A volatile week followed ever changing weather forecasts as hurricane Dennis moved mainland spilling rains across much of the south eastern US. There remains uncertainty whether or not rain will make it further north to the much needed regions of the eastern corn-belt. Deliverable cash corn prices have dropped from the middle of last week due mainly to the recent surge in the Canadian dollar which currently trades over 83.00 cents US. USDA Supply/Demand numbers released Tuesday morning revealed 05/06 ending stocks at 2.240 billion bushels, below last months estimate but above the 04/05 ending stocks forecast of 2.115.