Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 3rd, 2006

Hog Markets
Strong demand for live hogs early this week added a couple dollars to regional markets lifting bids above last Monday. The lagged national averages reported losses of as much as $4.00 US/cwt but are expected to firm into the latter part of this week reflecting the recent strength in the spot market. Packers have managed margins very well maintaining black ink during the recent slide in cut-out. Although processing margins are tightening packers continue to kill huge daily numbers which have exceeded 415,000 head on many occasions in the past week. Product values have performed well given the massive amount of pork entering the market. With demand not expected to subside any time soon, continual strength is forecast into the end of the year.
Lean hog futures restored a portion of the losses from the previous week with most contracts putting in a near-term bottom last Tuesday and trading higher into the weekend. The USDA released its Quarterly Hogs & Pigs Report on Friday with the following estimates, All Hogs 101.4%, Kept for Breeding 101.8% and Kept for Marketing 101.3% above 2005. Most reported numbers were within 0.5% of trade estimates resulting in a neutral report. Oct 06 through Aug 07 weekly changes in futures were as follows: Oct: 0.97, Dec: 0.55, Feb: 0.23, Apr: 0.15, May: 0.27, Jun: 0.60, Jul: 0.90, and Aug 0.20, all prices US/cwt.

Feed Markets
Soymeal futures continue to trade in a range near contract lows, managing to find some borrowed strength from outside grain markets. Upside trade looks limited as traders are not forgetting about large new crop inventories soon to enter the market. Soybean harvest progress was reported at 19% yesterday vs. 33% last year and the five year average of 26%. Rains will continue to delay harvest in eastern areas for the next week, however western areas will continue to experience favorable weather for cutting.
Corn futures had another strong week, gaining 13 cents as corn reached its highest level since July 17th yesterday with December closing at U$2.67 ¾ per bushel. Corn has been supported lately by stronger wheat values and wheat has been higher recently on dryness concerns in Australia and Argentina and 9% lower stocks than Sep ’05. Crop conditions remained flat week over week, with good to excellent ratings coming in at 61%, which remains in great shape compared to last years 55% for the same time period. Harvest is estimated at 20% complete compared to 25% last year. Demand expectations remain high heading into the heart of harvest which may limit seasonal downside. Hog producers should price grain accordingly and look at breaks in the market as pricing opportunities.