Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for April 18th, 2006

Hog Markets
Live hog bids were higher this week implying the seasonal bottom may now be behind us as the market adjusts to fewer supplies of animals. The holiday weekend reduced slaughter to 1.936 M which supported cutout implying strong demand for meat from the retail level. Reduced meat at the packing level due to reduced slaughter was enough to ignite buying from the end users heading into a strong demand period of the year. Cutout posted gains of $4.42 US/cwt while regional markets (ISM) climbed $2.95 US maintaining positive packer margins. National hog prices were steady to slightly lower due to the lag effect which will show higher prices in the coming days accounting for the gains in regional and terminal markets.
Lean hog futures were mainly higher with most strength showing up in deferred contracts Dec 06 gaining $2.80 US from a week earlier. Summer contracts were also higher but to a lesser degree as poultry stocks are still forecast to be burdensome during the grilling season. April lean hog futures expired Monday at $53.85 US settling to the CME cash index. June currently holds a $10.77 US /cwt premium to the cash which is within historical levels for the summer rally.

Feed Markets
Soymeal futures rallied $9.00 US from the contract lows reached last Monday. Prices have appreciated heading into spring planting as a typical weather premium is being added. Heavy rains in the Midwest have slowed the corn planting and are raising concerns for the soybean seeding soon to get underway. Cash prices for delivered soymeal have benefited from the recent strength in the Canadian dollar which climbed today to a high of 87.78 cents US. Although all signs still point to a weak soybean complex prices are likely to trade with a firm tone in the coming weeks to determine the level of planting this season. If final acres are well below current estimates the lows of the year will likely have already passed. Buying soymeal at the lowest price in nearly a decade can provide good coverage for the rest of 2006 when margins will likely be strained to their lowest level in the past few years.
Corn futures retreated from the highs of last week trading opposite to the soy market on overbought conditions and commercial selling. The start of this week has brought back plenty of buyers as rains threaten progress to US planting. Ethanol demand continues to be a focus of the market along with increasing domestic usage with more livestock production in nearly all meat sectors. The tariff currently on US origin feed corn will be decided later this afternoon (Tuesday) as the Canadian Border Services Agency reports on injury to Canadian corn producers. If kept in place the duty could mean additional costs to feed grain prices for the rest of 2006.