Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 10th, 2006

Hog Markets
Cash bids in regional and national markets increased from a week earlier climbing $2-4 US per cwt. Packer margins were squeezed to zero during the second half of last week as live hog prices rose while meat values slipped inverting the value of regional markets to cut-out. The negative margins were short lived as packers pulled back on offers and cut-out managed to restore its premium trading back over $70 US/cwt on Tuesday of this week. Weekly slaughter exceeded last year’s total by 3.7% and was the 4th consecutive week of greater than 2.5% over the same week last year. Thanksgiving in Canada has increased the number of market hogs moving south which could limit upside in cash until later this week.
Lean hog futures with the exception of the Dec where steady to higher. Oct was supported by upside in cash as it heads into expiry this Friday while the 2007 contracts continued to find support from recent hog numbers released by the USDA indicating manageable increases to the pig herd for the start of next year. Oct 06 through Aug 07 weekly changes in futures were as follows: Oct: 0.95, Dec: -1.23, Feb: 0.22, Apr: 0.65, May: 0.55, Jun: 0.50, Jul: 0.25, and Aug 0.70, all prices US/cwt.

Feed Markets
Soymeal futures found moderate strength this week, continuing their recent advancement from contract lows. Much of the momentum has come from borrowed strength from outside grain markets with corn and wheat experiencing strong gains. Traders are still watching the large crop currently being harvested which continues to put pressure on the market, and especially once damp conditions begin to dry up in the eastern US. For the week soymeal futures gained $6.60 US.
Corn futures had yet another strong week, gaining 21.75 cents as Dec corn reached new contract highs closing yesterday with December corn at US$2.89 ½ per bushel. Corn continues to be supported by stronger wheat values that continue to be driven by the Australian wheat crop and reduced world supplies. The US corn harvest has potential to be the second largest on record which if confirmed should exert some downward pressure, but with current wheat futures as strong as they are the market has a lot of uncertainty ahead.