Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for October 13th, 2004

Hog Markets
Cash hog prices have continued to drop in value over the past week after hitting a high on the 23rd of September. In spite of the lower cash prices, fundamentals appear to be improving. Last week¹s slaughter was the first time this year when weekly slaughter was smaller than the same week last year (not including short weeks). Cutout values also moved higher last week, as did packer margins moving from negative to positive in the past week. As margins remain positive and improve, the lower pressure on the cash should come to halt.
The department of Commerce will announce at the end of this week a preliminary antidumping rate against Canadian hogs exported to the US. Exports of Canadian market hogs are expected to be higher this week, ahead of the tariff, and lower next week. The market should also benefit from smaller slaughter numbers. Expectations are for weekly slaughter numbers to be steady to smaller than last year from now to the end of the year. This is in contrast to the year so far, slaughter has been 3% larger than last year. A large tariff at the end of the week could be supportive to futures prices, producers should wait for after the announcement to do any short hedging.

Feed Markets
New crop corn futures traded the week within cents of contract lows before posting small gains ahead of the USDA S/D report released on Tuesday. Those small gains were quickly erased as corn dropped to new lows of $1.97 US per bushel in the Dec contract following the release of the S&D report. Production estimated at 11.613 was reported at the high end of trade estimates contributing to the negativity. Ending stocks surged to 1.691 billion bushels for next year compared to the September number of 1.209.
Cash soymeal prices were steady until Tuesday when a larger than expected US soybean crop, predicted by the USDA, sent bean and meal prices lower. Cash soymeal has reached the lowest level of the year and is expected to continue to trade under pressure until further harvest is complete. Basis levels were narrowed due to the sharp losses in the futures but are expected to improve once the availability of new crop soybeans improves.