Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 31st, 2006

Hog Markets
Cash hog bids were mixed this week with regional markets quoted higher and the lagged national bids lower. Iowa/S. Minn bids were quoted $3.32 US/cwt higher for the week with most of the gains recorded on Monday. The lagged national bids were lower however, quoted down $1.22 US/cwt from the previous week. Cutout was reported as slightly higher, gaining $0.64 US/cwt and packer margins will have declined as cutout gains did not keep pace with gains experienced in spot cash market. Weekly slaughter exceeded last year’s total by 1.1% marking the 10th consecutive week of higher year over year slaughter levels.
Lean hog futures traded sharply higher on the week. All contracts, except nearby Dec (which came within 23 points) recorded new contract highs this Monday. Expectations of cash strength going forward, fund buying and strong demand helped propel nearly all contracts to new heights. Dec 06 through Oct 07 weekly changes in futures were as follows: Dec: 5.23, Feb: 4.88, Apr: 3.80, May: 3.05, Jun: 5.18, Jul: 2.93, Aug: 3.33 and Oct 2.45, all gains US/cwt.

Feed Markets
Soymeal prices once again ended higher for the week, gaining $8.70 US for the week ending Oct 30th finding continued strength from outside grain markets as the acreage battle continues between corn and soybeans. Soybean harvest as of Monday was 83% complete from 76% last week, and still below the 16 year average of 88%. Harvest progress has done well throughout the western and central corn belt however rain and wet conditions have been adding delays to much of the harvest throughout Indiana and Ohio. Conditions in the south are expected to become favorable for harvest in the next couple days.
Corn values rose 11.25 cents US for the week, following closely behind rising wheat. Last week, Australia cut wheat production estimates once again, this time from 11mmt to 9.5mmt which added support to both wheat and corn markets. Corn harvest progress as of Monday stood at 68%, still below last year’s 78%, but only slightly below the 16 year average of 69%. Many analysts believe that the recent corn rally was enough to buy 5 to 10 million acres for next year which for the time being is enough to keep up with the projected demand and could lead to a sell off and drop in futures prices. Hog producers should look at a potential sell off in corn as a pricing opportunity throughout the next couple of weeks.