Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 30th 2004

Hog Markets
Lean hog future prices fell hard to start the week after trending consistently higher from late August to this past Friday. The futures market added 20% and 15% respectively in the October and December contracts since hitting a low in late August. The large gains over this period pushed the October contract to its highest level since 1990, and the December to its highest level since 1996. Friday's Hogs & Pig Reports along with slightly lower cash prices to start the week brought the futures limite down on Monday in most contracts, and lower again on Tuesday. The Hogs & Pigs report indicated that all hogs and pigs on September 1 were 100.9% of a year ago levels, kept for breeding 101.1% and kept for market 100.8%.

The Hogs & Pigs report was not as negative as the markets reaction would have us believe. Most expectations were close to actual results, but the market was looking to take prices down after a tremendous run. The report was just the excuse needed to push prices lower and trigger sell stops. The big picture is still focused on demand. Demand has resulted in the strong prices so far this year, and demand has not started to fall. The market will eventually have to start focusing on demand again, and when it does prices will start to move higher.

Feed Markets
December corn futures traded the week with further losses pulling spot and new crop cash prices lower. Favorable harvest weather adding to production estimates provided much of the downside with little to no frost increasing yeilds estimates. Above seasonal temperatures in the northern Midwest has allowed late maturing crops to reach full yeild potential. Crop conditions reported Monday afternoon improved corn to 71% in the good to excellent category up one percent from last week which is counter seasonal for this time of year. The trend remains lower with no major surprises expected to dampen teh large crop projected for hte 2004/2005 crop year. End users of corn should continue to purchase product in the spot market limiting forward contracting until more crop has been removed.

Both cash and futures moved lower this week in soymeal as soybean harvest continues at a pace above the 5-year average and crop conditions reported at 66% improved 2% from last week. Basis levels improved as crushers are willing to quote new crop prices as beans begin to enter the market. Harvest is expected to continue at a fast pace this week and continue to run above teh 5-year average. Hog producers should keep hedging to minimim as further downside is expected until demand re-enters the market after harvest.