Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 24th, 2006

Hog Markets
Cash hog bids in regional and national markets were lower as packer’s had no problem sourcing hogs to fill their heavy kill schedules. Regional bids declined seasonally falling $3.99 US/cwt and the lagged national hog prices were $1.40 US/cwt (NBC) lower on the week. Cutout was soft but packer margins improved which will allow them to bid for hogs once the current surge in supplies has worked its way through the system. Weekly slaughter exceeded last year’s total by 1.0% and was 2.2% higher than last week.
Lean hog futures traded mixed this week. Nearby contracts were down slightly while deferred contracts gained value on anticipation that pork demand will remain strong, higher corn prices will reduce weights and disease pressure will affect marketing’s. Apr to Oct 2007 are all within $1.00 US/cwt of their contract highs, leaving only Feb 07 and Dec 06 contracts outside this tight range. Dec 06 through Oct 07 weekly changes in futures were as follows: Dec: -0.77, Feb: -0.19, Apr: -0.02, May: 0.12, Jun: 0.50, Jul: 0.37, Aug: 0.25 and Oct 0.50, all prices US/cwt.

Feed Markets
Soymeal prices continue to find strength, gaining $4.40US on the futures for the week ending Monday October 23th. A climbing CAD through weeks end helped to ease delivered prices and nearly offset the weeks’ gains. Soybean harvest as of Monday was 76% complete from 69% last week, and below the 16 year average of 83%. Many traders were anticipating harvest to have advanced further throughout the weekend however continued rains in the eastern Midwest slow progress. Fundamentally the soy complex contains considerable negativity however competing for next year’s acres against corn and wheat will limit downside.
Corn futures had a relatively quiet week ending only 1.5 cents higher with many traders expecting the recent rally to be nearing an end. Corn harvest progress as of Monday stood at 53%, significantly below last year’s 63%, but only slightly below the 16 year average of 55%. Considering the early start to the growing season and the favorable summer weather, the harvest progress numbers are somewhat surprising as many traders and industry personnel anticipated a much quicker harvest. The corn market has shifted its attention to the end of next year when ending stocks are projected to fall below 1 billion bushels in the US. Between now and then expect price fluctuations with downside seen as pricing opportunities.