Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for January 17th, 2006

Hog Markets
Cash fell dramatically last week after being quoted as nearly steady since the start of the holiday season 4 weeks ago. Regional cash markets fell the most with the ISM down U$7.58/cwt. Cash came in steady on Monday and Tuesday but was taken down very hard Wednesday to Monday. Cash was pushed lower by packers as they seen their cutout values drop considerably in the week prior and reduced kills to maintain their positive margins. Cutout this week was down only slightly and not near the same degree in which cash declined. This has left packers with incredibly large packer margins, which should entice them to bid up for hogs as soon as market ready hogs gets a little tight.
The lean hog futures market was closed Monday due to Martin Luther King Jr. Day. The market needed the breather due to downward movement experienced during the Monday to Friday trade. The market was up slightly on Monday but on Tuesday and Wednesday the market experienced some significant weakness and the Feb and Apr contracts went limit down (U$2.00/cwt) both days. All contracts experienced weakness for the week with front months experiencing the most with Feb down U$5.67/cwt. The Feb contract has 5 weeks until its expiry and may not recover from the recent downside. However, all other contracts are expected to make a recovery as the long term fundamentals look good well into the summer months.


Feed Markets
Nearby March soymeal futures fell Monday to Thursday last week in anticipation of the USDA report released on Thursday morning. The report increased ending stocks for the 05-06 crop year by 100Mbu to 505Mbu, and decreased exports by 70Mbu to 950Mbu. This report, combined with positive weather forecasts from South America, confirmed the downward pricing for the week but Friday’s soymeal futures saw some support throughout the day and ended higher on ideas that the futures market had been oversold. 2006 forward soymeal pricing should be monitored throughout the next few weeks, and strongly considered on any significant market movement. As with most US futures markets, soymeal markets were closed on Monday due to Martin Luther King Jr. Day.
Corn futures traded quietly over the past week in and around Thursday’s monthly USDA supply/demand report. The board went higher Tuesday/Wednesday in advance of the report. Futures fell following a bearish report which lowered exports by 50 million bushels and increased production numbers. The result was revised ending stock projections of nearly 2.5 billion bushels. Favourable weather in South America along with further selling pressure are expected to keep the market on the defensive for the near future. The Canadian cash market continues to trade at two levels with US livestock exporters having the luxury of duty free corn.