Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 18th, 2005

Hog Markets
Cash hog bids were lower in all markets with demand for live hogs lessening from major packers. Cutout was quoted lower from a week earlier with seasonal weight increases supporting the meat supply and providing negativity in meat values. Cash and product values are incurring their normal seasonal declines, however due to domestic and specifically export demand, cash and cutout values remain relatively high for this time of year. Slaughter albeit high, was below 2004 levels after 2 weeks of higher numbers, which will add some support to the market. Hog weights have increased and are now 3.9lbs heavier than 2004 which will play a role in pricing for the weeks to come.
Lean hog futures were weak as funds liquidated some of their long positions pushing the market sharply lower. Market weakness is expected for the next 2 to 4 weeks as slaughter and pork production numbers are estimated to be reasonably abundant. Following expected short-term weakness the market has potential to turn higher once again as slaughter numbers are estimated to fall significantly below 2004 numbers from the middle of Nov to the end of 2005.

Feed Markets
Soymeal futures traded in both directions over the past week, first higher following the release of the USDA Supply/Demand numbers released last Wednesday. Although production estimates were greater than last reported by the USDA in Sep, estimates fell short of industry projections leading to short covering and higher trade. Soybean production in the US has now increased to an expected 2.967 billion bushels with average yields forecast at 41.6 bushels per acre. Acre disappearance was significant at 900,000 adding to the initial positive reaction in the futures. At the start of this week prices moved in a different direction following reports of harvest progress reaching 76% above the 72% average for this time of year. Range bound trade can be expected for the next couple of weeks until more is known on the size of this year’s crop.
The nearby Dec corn futures ended unchanged from a week earlier implying little new information entered the market above what is known by traders. Cash also steady to slightly higher with delivered product in Canada increasing due to losses in the dollar in the past 7 days. Production for the 2005/06 US corn crop is slated at 10.857 billion bushels up from 10.639 in the Sep report. Stocks to use ratios increased to 20.6% above last year’s 19.8%. Harvest progress was reported at 49% ahead of the 40% average for the second week of October.