Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 1st, 2006

Hog Markets
Cash hog bids were sharply lower for the week heading into the Labor Day long weekend as ample hog supplies allowed packers to drop bids knowing fewer kill days were available for this week. Regional markets dropped $4.00 US/cwt from Monday to Friday with no values being reported early this week due to the holiday on both sides of the border. The lagged national averages showed declines of $5.00 US accounting for weakness which surfaced late in the prior week. The recent downside is expected to be short lived as cutout maintained its value propelling processing margins to their highest levels in over 9 months. With positive double digit margins packers have plenty of room to raise cash this week to attract hogs for an expected large Saturday kill.
Lean hog futures were higher in spite of the lower cash in anticipation of a steady to firm cash market this week. Oct 06 through Aug 07 weekly changes were as follows: Oct: 1.53, Dec: 2.33, Feb: 2.12, Apr: 1.68, May: 1.45, Jun: 1.12, Jul: 1.12, and Aug 0.95, all prices US/cwt.

Feed Markets
The soybean and meal markets had little to trade from last week as futures and cash prices ended flat heading into the Sep long weekend. Progressing crop development and stable conditions held the market from making any change until further reports were made on growing conditions and upcoming weather forecasts. Markets were closed on Labor Day but opened $3-4 higher on Tuesday as traders noted strength in other grain markets and oversold conditions in the beans. Crop production estimates remain high but futures are priced accordingly, any surprises to crop size would likely be lower indicating buying opportunities at present values for at least a portion of meal requirements.
The trend in corn pricing appears to be shifting for the near-term as a small premium is added to futures heading into final stages of development. Futures have been able to lift new crop contracts nearly 15 cents per bushel off the Aug 18th lows. The strong export pace and domestic demand from livestock and ethanol sectors are seen as supportive to price while the approaching harvest season is a limiting factor to the upside. The Sep USDA production estimates could contribute to the firm tone as analysts are indicating possible revisions to current usage which would imply reduced stocks for both the US and world markets justifying a move to higher price levels.