Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 26th, 2005

Hog Markets
Cash hog bids were lower in all markets as there appears to be an abundance of hogs ready for market. Cutout was quoted lower from the previous week as increased weights pressured the product market and a higher US dollar index slowed export demand. A higher US dollar index makes US pork more expensive on the international market, which decreases demand. However, the US dollar index is expected to soften going forward which will support exports to the end of the year. With the exception of this short-term weakness, exports are expected to remain strong (25% higher year over year) and as a result, cash prices are also forecast to remain strong through the end of the year and into 2006. Hog weights have steadied and are now only 1.3lbs heavier than 2004 levels.
Lean hog futures experienced a week of sideways range bound trade as the market lacked new bearish and/or bullish information. This weak, range bound trade can be expected until there is new information of a definitive market direction. Following this short-term market trend, futures have the ability 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 were unchanged from last Tuesday prolonging pricing opportunities of the past couple of weeks near the lows. Support in the market has made itself known indicating a potential near-term bottom with harvest now at 87% complete. The current harvest pace continues to hold 8% above the average for this time of year with favorable weather forecast for the next week which should bring harvest near completion. Foreign demand concerns with the spread of bird flu is limiting upside but domestic consumption called higher in 2006 is supportive to price. Final yields and production to be reported later this year will help set direction for the next leg of the trend.
A move to new contract lows and below $2.00 US per bushel in the nearby Dec depressed cash corn prices this past week as end users buy up stocks for the months ahead. Pricing opportunities continued from last week as favorable harvest weather added to negativity with 65% of the crop now in the bin. Forecasts for the next 6-10 days look good for the Midwest limiting buying with harvest expected to maintain current pace ahead of the average. Yields have also been reported average to above average which is limiting long term pricing as end stocks could see further adjustment higher in next months production reports. Producer selling was noted to be slow at the country elevator levels however storage issues could lead to more corn on the cash market and current prices