Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 27th, 2005

Hog Markets
Cash hog prices were higher over the week posting small gains each day except Friday and ending $2.50/cwt higher on average in direct markets. The steady cash increase was a sign that packers were current with bookings and the slight decline on Friday was met with a lower than anticipated Sat kill. Positive packer margins, albeit much smaller then a week ago, are driving big kill schedules which are exceeding 400K head per day. Hog weights are slowly increasing from their seasonal declines that had them fall below 2004 levels for the past 7 weeks. Seasonal increases to hog flows are expected in the weeks and months ahead however total weekly slaughter is not expected to surpass 2004 levels.
Lean hog futures were also higher for the week. Oct and Dec hit new contract highs on Friday September 23, while all 2006 contracts hit new highs on Monday September 26. Trade has been anticipating a glut of animals to come to market but this has not been materializing and traders are now starting to put more into the market. The lower US dollar has been supporting exports and cutout values and until (or if) cutout breaks lean hog futures should remain to be firm.

Feed Markets
Most of last week’s soymeal trade was plus/minus $2.00 US limiting movement in cash delivered prices. Early this week however selling pressure surfaced dropping nearby futures by $4.00. Harvest progress reported at 19% is well below the 15-year average of 36% which is also the rate reported for last years crop. Conditions of the crop still in the field did improve by 2% and is rated even with averages for this time of year. With the market anticipating the second largest bean crop in the past 15 years, downside looks to continue unless major adjustments are made following harvest and the effects of this summer’s extreme heat are shown in production. Implementing hedging strategies for soymeal at current prices for the next 6-12 months could net end users the second lowest cash price in 4 years.
Futures trade in the US corn market was slow with little activity this past week. Nearby Dec dropped slightly but cash prices maintained the lows set during the previous week. Progress reports released Monday after the close pegged harvest at 18% complete up from last year and the 15-year average. Crop conditions however were unchanged as is typical for this time of year as plants complete their growing stages. Major changes to supply are not expected in the corn balance sheet for the remainder of the year however the demand side may see potential increases due to greater ethanol production given recent surges in fuel prices.