Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for July 19th, 2005

Hog Markets
Hog packers have cut back slaughter levels over the past week in response to slower market hog deliveries. Extreme heat in parts of the US has backed up hogs and has resulted in smaller than expected slaughter numbers. Last week’s slaughter was 2% below the same week the previous year. The smaller slaughter has helped to move cutout values higher, but has not helped hog prices. Concerns exist that once the weather breaks and numbers start to flow again, cutout will back off and packers will be able to lower the price that they pay for cash hogs.
The Oct contract will likely be the one with the most selling pressure since it has had growing open interest. The top end of its range has been just under $60, and if the cash starts to fall, the Oct will not break above this. Producers looking to sell futures and take protection should consider selling the Oct contract.

Feed Markets
Soy markets saw significant trade in both directions over the past week as weather forecasts continue to be the dominant fundamental factor. The volatility however has not been as great as it has been in the corn market due to the different stages of crop development. With corn pollinating and soybeans a few weeks away yet, there is still time for the needed rains to come before we start seeing significant yield damage. A full week of gains were wiped out Tuesday with more than a $10 US/ton drop on most contracts. As has been the trend for the past month, shifting weather forecasts have shown the ability to drastically move markets in both directions. With old crop bean supply becoming tighter, soymeal basis has firmed up and has increased Canadian cash prices by as much as $5.00 per tonne. With crop conditions continuing to slip in the USDA’s weekly reports, the down days will become more attractive for producer hedging as the uncertainty over the new crop continues to grow.
Volatility in the corn market was as present as ever over the past week as the crop has moved into the crucial pollination growth stage. With less rain than was expected developing from hurricane Dennis last week, December futures were up 23 cents from Tuesday to this past Monday. Tuesday July 19th was a correction day as better forecasts sent the same contract down by nearly 12 cents to continue the volatile trend. With the extremely dry areas shrinking, and talk that the high heat may not last as long as initially thought, Tuesday’s fund sell off may well continue throughout the week.