Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for August 13th 2004

Hog Markets
Cash hogs continue to command steady prices despite 3% higher production year over year. This past week has been the ninth consecutive week cash prices firm. August futures will expire Friday at noon at contract highs just as the other contracts that have lapsed for 2004. Cash is king leading the market to higher levels which futures were reluctant to price in. As for the Oct lean hog futures contract, which becomes lead month Monday, it usually trades at a 5-8 dollar discount to cash, which is the current level indicating fair value. Strong demand has continued to keep cash hog prices steady to firm. Cutout values have slipped a dollar after recovering to over $80 US/cwt last week however, the downside is giving rise to skiddish market reactions during Monday and Tuesday's trade.
Strong demand, cheaper feed and higher prices are coming together and causing a renewed interest in feeder pigs and isoweans. 2004 futures provide very profitable returns, it is the 2005 lean hog futures that have the market at a standstill. With Japanese trade out of the beef market until possibly the onset of the new year, hogs still do have potential to break out and experience higher trade during the first quarter of 2005

Grain Markets
Last week corn experienced contract lows, broke out and traded higher week over week. Yesterday, corn closed higher following a higher than expected export inspection number. Although well below what is needed to hit USDA projections, it did give the market strength in the day. The weekly crop progress report showed that crops rated at 76% good-to-excellent following the close yesterday compared to 67% last year. End users of corn should begin to determine total requirements for the year ahead and consider contracting a portion of requirements on lower breaks
Soybeans were higher in quiet activity. Buying was tied to weather where concerns over yield-reducing cool weather during pod-setting and pod-fill continue to filter through the market. Persistent cold weather in the Midwest continues to provide support to the market as the cold trend brings about fears of early frost. Blend prices for October 2004 to October 2005 have come off the lows but delivered meal continues to provide an excellent forward contract opportunity for the next year.