Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for August 4th 2004

Hog Markets
Hog prices continue to dictate high prices throughout North America. For the eighth consecutive week cash price has been firm, despite record kill levels for the month of July. For the month of August, futures started strong with contracts surpassing technical resistance in the Oct and the Dec contracts. Strong demand has continued to keep cash hog prices steady while the cutout value recovered to over $80 US/cwt. The longer cash values hold out, the less hesitant the market is to price premiums into the deferred fall and winter months.
Strong demand, cheaper feed and higher prices are coming together and causing a renewed interest in feeder pigs and isoweans over the last week. 2004 futures provide very profitable returns, it is the 2005 lean hog futures that have the market guessing. With the Japanese out of the beef importing business until possibly the onset of the new year hogs do have potential to break out an experience higher trade especially during quarter one of 2005.

Grain Markets
New contract lows in corn futures lead to lower cash prices over the next week as steady crop conditions further the close yesterday compared to 67% last year. With very little threat of adverse weather over the next two weeks prices are expected to trade steady with a weak tone. Optimism for the 2004/05 corn crop has grown to near record levels slowing the downside in the corn market as trade questions the possibility of over estimating production/ End users of corn should begin to determine total requirements for the year ahead and consider contraction a portion of requirements on the next $0.05 per bushel move in the futures.
The free fall in soymeal prices continue for both old and new crop contracts with the spread between prices narrowing significantly over the past week. Basis improvements to the old crop meal supplies provided much of the negativity to the August while new crop basis remained unchanged. Ideal weather for soybean pollination during the next two weeks will add to the lower prices expected with a weather threat unlikely at this point. Blend prices for Oct 04 to Oct 05 have dropped to historical lows providing excellent forward contract prices for the next year.