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Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 7th, 2006

Hog Markets
Strong demand for live hogs continued for the start of November as cash hog bids climbed $2.00 US in national reports while regional numbers were flat. Cash averages in the Midwest for the past week out-performed those recorded in 2005 indicating good movement of increased pork levels over last year. So far fourth quarter production increases have contributed nothing other than seasonal declines which could see a bottom within the next 4-6 weeks. Minor losses to the cut-out on Monday squeezed packer margins however as they have done all year packers will likely manage by easing bids to create more favorable processing conditions.
Lean hog futures were able to reach contracts highs again over the past week as rising feed costs support theories of lighter weights and reduced pork for the start of 2007. Near-term cash strength contributed to the upside which resulted in mixed settles from a week earlier. Dec 06 through Oct 07 weekly changes in futures were as follows: Dec: -0.43, Feb: -.017, Apr: 0.87, May: 1.18, Jun: 1.25, Jul: 1.45, Aug: 1.80 and Oct 2.30, all gains US/cwt.

Feed Markets
Soymeal futures continued their climb upwards, gaining $4.90 US for the week ending Nov 6, 2006. Rising corn prices have supported soybeans and meal as traders consider the oilseed market to be under valued compared to current corn values. Soybean harvest as of Monday was 90% complete from 83% last week, and on pace with the average of 91% for this time of year. Soybeans are expected to follow corn patterns closely in efforts to hold onto as many acres in 2007 as possible. It is already estimated that soybeans have lost 5 million acres due to the recent run up in corn futures.
Corn values continued their strong trend throughout the week, gaining 14 cents US as private forecasters estimate national corn yield to be as much as 2.5bpa less than the October USDA report which is to be released this Thursday. Corn harvest progress as of Monday stood at 81%, significantly above last week’s 68% and nearly on pace with the average of 82%. It is believed that the recent rally in corn has been enough to buy upwards of 6.3 million additional acres for 2007, most of which have been taken from soybeans. Hog producers should keep a close eye on this Thursday’s USDA report as the market has 2.5bpa less currently priced in and anything different could lead to further trade volatility.