Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for June 28th, 2006

Hog Markets
Regional cash prices slipped from the high set last week but remain strong versus historical values. The ISM was quoted as $2.88US/cwt lower for the week but the lagged national prices were approximately $1.43 higher. Supplies remain tight but packers have reduced their kill schedules to maintain margins. Packers have been successful in enhancing margins and are now making in excess of $10.00 US/hog. Thus, cash prices could turn up again in the very near future as packers attempt to increase their kill schedule following the upcoming short week. Weights have been sliding to new lows but have turned slightly higher which could indicate that the lower slaughter levels have caused a slight build up of market ready animals, which may indicate that hogs are not as tight as they appear.
After the fabulous week last week, lean hog futures were set for a slight correction. Jul ended the week $2.92 US/cwt lower and sits at a discount to cash, which is not common for this time of the year. Due to the discount an assumption can be made that the market expects further weakness but market fundamentals indicate that some further upside following the short week is likely. The Aug through Feb contracts ended the week as follows: Aug ended down $2.70, Oct down $1.47, Dec down $1.32, and Feb down $2.07, all prices US/cwt.


Feed Markets
Soymeal prices along with most other commodities dropped from a week earlier providing buying opportunities for nearby and forward meal requirements. Cash traded near the lowest price so far in 2006 due to basis improvements from US crushers and weak futures. A noticeable increase in soybean movement contributed to the lower basis numbers in the Midwest. Soybean crop conditions were steady from a week earlier @ 67% g/e and above the 2005 rating of 59%. So far heading into the last week of June crop conditions are also ahead of the 16-year average of 62%. Rumors of fewer soybean acres in the US will be confirmed at the end of June as the USDA reports production estimates. Buying ahead of the report would reduce the risk of a surprising acre estimate and the threat of firming prices.
Corn futures experienced heavy sell pressure at the start of this week as weather over the past weekend was viewed as ideal to crop development. Ample rain and moderate temperatures contributed to crop conditions reported at 71% good-to-excellent up 3% from last week and 6% from last year. Yield estimates will continue to grow as the crop develops at a pace ahead of 2005 which provided near record bushels per acre. The USDA will release crop production estimates on Friday, June 30th with estimates of 1-2 million more acres than initially projected at the start of 2006.