Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for January 12th, 2006

Hog Markets
Cash was steady over the past week in most markets as holiday schedules came to an end and packers looked to ramp up kills from the previous short weeks. Hog supplies were sufficient to fill packer needs however there did not appear to be the typical excess in supplies surrounding the year end holidays. A new cutout series is now being reported as of Jan 3rd with an average $1.25 US premium to the previously quoted meat values. The change was made in the industry to better reflect the value of cuts sold by the packers. Slowed exports have lowered the old and new cutout values but the weak US dollar index is expected to encourage exports into the coming weeks.
Lean hog futures were mixed from last Tuesday with the nearby Feb dropping due to the steady cash and the $7.00 premium Feb carried over the regional markets. June however was higher and within 50 points of contract highs on Monday indicating the markets anticipation for upward trending cash once through the current weakness.


Feed Markets
Nearby Mar soymeal futures consolidated over the past week and have now dropped $17.00 US from the highs reached during the last trading days of 2005. Improving weather in Argentina for growing soybean crops was a major factor leading to the sell-off. Private production forecasts out of Brazil in excess of 58 mmt also put a negative spin on trade along with talk of adjustments to US ending stocks due to an export pace well behind that needed to reach USDA projections for the year. Freight rates appear to have leveled off for the time being allowing hog producers the opportunity to hedge requirements for the coming year. Downside is limited to another $10 US based on technical support levels and should be a target for 2006 meal.
Corn futures reacted to the sharp declines in the soy complex losing 4 cents per bushel from last week. A drop in the Canadian dollar over the same period limited the cash delivered prices from falling but corn did move at a lower price at the start of this week. Exemptions to the corn duty are being offered to Canadian hog producers who market product into the US. Sows, weanlings, market hogs and even final meat products are considered US bound in most cases providing corn users the opportunity to regain some if not all of the tariff. Exports from the US to foreign buyers are on pace with year ending projections so little change is expected in the S/D report out on Thursday.