Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 26th, 2006

Hog Markets
Regional and national cash prices fell this week as the massive hog slaughter weighed on the product market and packers pushed cash lower to manage their margins. Regional cash prices fell as much as $5.07 US/cwt in the Iowa/S. Minnesota region and the lagged NBC reported $2.52 US/cwt losses. Cutout declined by $3.73 US/cwt indicating packers managed margins appropriately and were able to widen values during the lower cash period. This is relatively good news as it will give them the flexibility to bid for hogs when supplies are not so abundant. Demand for pork remains strong given the level of slaughter and the modest decrease in product values.
Lean hog futures ended the week lower on the sharp move in cash and ideas that product values will move lower in the near future. The Aug cold storage report was released and pork came in slightly higher than trade estimates, which added to this week’s softness. However, upon further review of the cold storage report, all the main cuts (bellies, hams, and loins) came in much lower than last year, which is supportive to the market. Oct 06 through Aug 07 weekly changes in futures were as follows: Oct: -2.57, Dec: -2.50, Feb: -1.80, Apr: -1.42, May: -0.47, Jun: -1.45, Jul: -1.05, and Aug -0.75, all prices US/cwt.

Feed Markets
Soymeal futures continued to find support for a second consecutive week after reaching contract lows nearly two weeks ago. Nearby futures contracts inched higher by $1.70 US in the presence of wet weather conditions that continue to threaten many early harvest attempts. Crop conditions continue to improve reaching 62% in the good to excellent category. Harvest progress still continues to fall behind only coming in at 9%, up only 3 from last week and well under the 17% seen last year at this time.
Cash corn prices continue to rise as many factors are combining to support price. Wet weather conditions delaying many harvest attempts, funds remaining net long and a recent rebound in crude oil futures are all contributing to the price direction. Crop conditions remained flat week over week, with good to excellent acres coming in at 61%, which remains in great shape compared to last years 52% for the same time period. Harvest is estimated at 13% complete and with progress prices can be expected to soften further with increased cash grain availability. The general consensus among market analysts surrounding the market remains higher into the New Year. Producers should keep a close watch on the market and use harvest dips as pricing opportunities.