Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 19th, 2006

Hog Markets
A massive weekly slaughter, recorded 5% above the same week last year, pressured regional cash and weighed on futures as packers took advantage of the ample hog flows to limit upside in cash. National averages and the CME index were flat as of Monday but are expected to drop during mid-week accounting for the losses seen late last week. Cut-out lost $2.00 US per cwt from the week prior but continues to trade at the highest average weekly price over the past 10 years. Impressive demand for pork has contributed to the strength in cut-out for most of 2006 with only the latest export report indicating a possible shift in the trend.
Lean hog futures ended the week mixed, nearby Oct and Dec lower and all 2007 contract steady to slightly higher. Negativity surfaced last week following the release of US pork exports. The USDA reported July exports down year over year which is the first time this has occurred in over 3 years. Oct 06 through Aug 07 weekly changes in futures were as follows: Oct: -0.55, Dec: -1.32, Feb: 0.12, Apr: 1.03, May: 0.40, Jun: 0.50, Jul: 0.32, and Aug 0.25, all prices US/cwt.



Feed Markets
Soybean and soymeal futures found technical support after dropping to new contract lows last Wednesday. Short covering contributed to last weeks upside lifting nearby soymeal $8.50 US from the lows. Weather concerns including the threat of frost this week, a wetter trend ahead and cool temperatures all contributed to the firm tone to start this week. Crop conditions continue to improve reaching 61% in the good to excellent category. Harvest is just underway with 6% of the acres complete however analysts expect progress to fall behind the trend due to recent conditions. The near-term trend looks higher until more acres are off and a better idea of yields is known.
Cash corn prices rose from a week earlier supported by upside in the futures. Funds continue to be net long the corn market with long-term fundamentals pointing towards higher prices into the coming year. In the short-term however harvest is likely to provide a low giving hog producers the opportunity to price feed. Forecasts for cooler wet conditions added to the tone this week which is expected range bound at least until more corn is in the bin. After harvest the market will be demand driven and so far demand is projected higher with domestic and world corn ending stocks expected to fall considerably from the past 2 years.