Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 1st 2004

Hog Markets
Slaughter numbers so far in August have been 2.4% greater than last year. The large supply, however, has not been enough to offset the strong demand for pork. Prices are currently 45% gr4eater than at this time last year. Even though prices have fallen in past weeks, they continue to be week above the normal price range. The seasonal drop in cash is expected to turn around after the long weekend when steady supplies and continued strong demand support prices.
The futures market continues to trade at a discount to the cash, as it has most of the year. The October futures contract is currently at a $8.00 discount to the cash. If the cash moves higher after the long weekend, the futures market will need to post large gains to narrow the discount before the October contract goes off the board. Producers should consider selling Dec lean hog contracts to hedge production for the end of the year at new contract highs. At these prices you will have locked in a considerable profit while still talking protection against a major drop in demand or a charge in the protein outlook, such as opening the border to Canadian cattle.

Feed Markets
Corn futures dropped late last week influenced by heavy selling pressure from large fund positions however cash prices experienced little downside as narrowing basis numbers limited price movement. Suppliers fear of less available product caused the higher basis levels and restricted availability of forward corn for the fourth quarter of this year. Early this week futures reacted to forecasts of poor growing conditions and a chance of frost for the week ahead by adding five cents US per bushel to forward prices. Volatility can be expected until harvest begins, several weeks away.
Soymeal futures continued with a lower tone over the past week trading down to within $5.00 US of the lows in the new crop contract. Cash soymeal for the end of August also experienced selling pressure following news from US crushers the soybean availability may get crushers through to new crop supplies. Early this week however futures bounced on reports from the National Weather Centre that another round of frost was forecast for the US Midwest during the week of Sept 10-13. Speculative buying on final production uncertainty lifted the market $7-10 US in most contract on Monday. End users of meal should expect sharp rallies in the market following news of adverse weather but realize that if poor conditions do not materialize prices would be expected to return to the previous lows.