Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for May 30th, 2006

Hog Markets
Regional and national cash markets were lower in the past week as packers found themselves with ample supplies heading into a short week. ISM bids were quoted $3.81 US/cwt lower which can be considered a seasonal decline as cash prices tend to lose value the week before Memorial Day long weekend. Due to the lag effect, National bids came in only slightly lower for the week. Slaughter was reported 0.8% lower than a year ago, which is the first reported lower slaughter since the shortened week due to the immigration rallies. Weights were reported at 268.1lbs, which is 0.1 lbs less than last year and the first time weights were reported lower in 2006 versus 2005. Weights have been higher all year which has attributed to higher year over year pork production levels but this recent development can be considered a positive movement for the market.
Lean hog futures lost significant value across the board with most downside showing in the deferred contracts. Prior to weakness at the start of last week, Dec futures reached contract highs implying the markets expectation for firm prices later in the year. Cash movement before the short week caused the sell off in futures but a firm (seasonally high) cut-out quote on Friday and higher cash expectations through the short week should entice some contract buying and lift the deferred contracts back near their highs.

Feed Markets
Cash soymeal prices benefited from flat nearby futures and a move over 90 cents US by the Canadian dollar. Heading into the Memorial Day long weekend July futures dropped to contract lows of $170.50 US per short ton. Favorable growing conditions and good weather in the 6-10 day forecast provided much of the weakness but concerns over falling demand added to negativity. Soybean and meal futures, although lower have seen significant support over the last week implying a potential low for the market in the near-term until better estimates are reported on this year’s crop. Final acre estimates have a range of 1.5 million given the fast planting pace of corn this spring which may have consumed acres intended for soybeans. The USDA will report planted acres in June giving the market a better idea of production.
Corn futures were flat from last Monday but dropped 5-6 cents during mid-week before returning to the mid $2.50’s in the July contract. Solid demand from livestock and ethanol sectors has the corn market pricing in further gains as new crop prices approach $3.00 per bushel. Contract highs currently in the Dec at $2.87 ¼ per bushel exclude major weather premiums which have not been necessary due to favorable weather. Hog producers should prepare for higher feed prices later this year as the trend in commodity prices continues to rise.