Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 17th, 2006

Hog Markets
Cash hog bids in regional and national markets were slightly lower as packer’s intensity to buy hogs declined due to dwindling processing margins. Regional bids were $0.69 US/cwt (ISM) lower while the delayed national bids declined by $1.87 US/cwt (NBC). Cash changes were minor as losses to start last week were erased by increasing bids heading into the weekend. Weekly slaughter exceeded last year’s total by 2.2% and was the 7th consecutive week of greater than 2.0% over the same week last year. Cutout, like cash had minor declines for the week and was quoted as $1.20 US/cwt lower.
Unlike cash and product values, lean hog futures appreciated substantially during the week, which also saw the Oct 2006 contract expire on Friday Oct 13th at 65.15 US/cwt. May to Oct 2007 contracts reached contract highs multiple times this past week, with the most recent occurring on Monday, after the Oct 06 contract expired. The current strength in grain prices, most notably corn, has been thought to have contributed to the recent surge in the deferred hog contracts. Dec 06 through Aug 07 weekly changes in futures were as follows: Dec: 1.63, Feb: 1.27, Apr: 1.85, May: 1.18, Jun: 1.42, Jul: 1.73, and Aug 0.82, all prices US/cwt.

Feed Markets
Soymeal prices continue their trend higher, gaining $8.40US on the futures for the week ending Monday October 16th, with the weak CAD also contributing to increasing prices. Thursday’s USDA report was bearish for soybeans which increased production by 96 million bushels to 3.189 billion bushels and increased yield by 1 bpa to 42.8bpa, however this was less than traders anticipated resulting in upward trending prices. Soybean harvest as of Monday was 69% complete from 47% last week, and slightly below the average of 72%.
Corn futures also continue to trend higher, finding strength from numerous contributors, including wheat, weather, harvest and USDA supply/demand. Corn futures rose 27.25 cents on the week initially on borrowed strength from wheat and later on a bullish USDA report which cut acreage, decreased yield, and estimated 06-07 carry-out under 1 billion bushels. Also contributing to the strong price is the slow harvest pace due to weather, which as of Monday stood at 41%, which is exactly on average, however behind the expected pace based on this growing season.