Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 14th, 2006

Hog Markets
Cash hog prices dropped late last week with losses carrying through to this Tuesday as packers experienced narrowing processing margins and took money off bids for live supplies. Hog flows were down slightly averaging 1.4% below the previous week but continued with levels above 2005 reported 2% higher than the same marketing week last year. Cutout was the strongest component of the hog market at the start of this week which allowed packers to regain some margin by the middle of this week. Losses in cutout were within $1.50 US/cwt while cash downside was $3-5 US between regional and national markets.
After reaching new contract highs on Wednesday lean hog futures experienced profit taking and commercial hedging sending most months lower for 3 consecutive sessions. Overbought conditions contributed to the downside which resulted in a range of nearly $4 in most contracts from last weeks high and Monday’s low. Dec 06 through Oct 07 weekly changes in futures were as follows: Dec: -2.95, Feb: -2.93, Apr: -2.20, May: -1.60, Jun: -1.13, Jul: -1.58, Aug: -1.00, Oct -0.93 and Dec -1.15 all losses US/cwt.



Feed Markets
Soymeal futures experienced a small correction in price throughout the week, decreasing $4.70 US since the release of Thursday’s USDA supply and demand report. The USDA report estimated soybean production at 3.204 billion bushels and an average yield of 43.0 bpa, both estimates came in above the October report however these gains were not quite as big as originally expected. Soybean harvest as of Monday was 94% complete which is equal to the average pace for this time of year.
Corn values lost a little of their strength as well upon the release of the USDA report even with the report being on the bullish side for corn, as many traders were awaiting the release of the report before reversing some of their positions. Corn harvest progress as of Monday stood at 90%, slightly behind last year’s but exactly on pace for the average. The damp weather is still hampering with the eastern corn belts efforts to complete harvest as this is where much of the crop still remains in the field. For corn production, the USDA reduced yield from 153.5bpa in Oct to 151.2bpa and estimated ending stocks at 935 million bushels which is concerning considering the additional demand from ethanol in the upcoming years.