Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 12th, 2004

Hog Markets
Packers were aggressive last week in their pursuit of cash hogs. After chasing hogs for the past few weeks, packers had trouble meeting their kill schedule and paid a large premium for hogs at the end of the week. Prices have started to fall this week, and are expected to keep falling from now through to US Thanksgiving. The only other time in recent time in history when prices reached current levels in the month of November was in 1996 when availability of slaughter animals was severely restricted. This year, supplies in the past few weeks have been slightly below year ago levels, but demand has been well in excess of past years.
The Dec contract hit a new high on Friday last week reaching $74.35. The rest of the board has also hit new contract highs recently. The June contract hit a new high of $73.20, but below last year when the contract expired at $79.20. Aside from holiday shortened weeks between now and the end of the year, the supply of market hogs is expected to be slightly below last year, and demand should continue to remain excellent.

Feed Markets
New contract lows in the nearby Dec futures confirm the weak tone in the market associated with the large crop expected for this year, USDA S/D report to be released this Friday is expecting increased production numbers, which would coincide with Sparks numbers released earlier this week which pegged the corn production at 11,750 billion bushels, up 375 million from their Oct report. Slow harvest progress in northern states have added to cash bids which are expected to trade with a small premium until more better quality corn becomes available.
Soymeal futures continued to trade with a lower tone over the past week along with US cash prices. Narrowing basis levels were not as forgiving for Canadian delivered prices, which increased due to poor availability of cash soybeans. Low commodity prices have reduced producer selling causing local markets to increase. Higher costs for beans are being passed along to the end user in the cost of soymeal. News that China may have cancelled US soybean orders had negative implications for the market contributing to the weakness in the futures. The overall trend remains lower as the record crop nears harvest completion but hog producers should be aware that near-term shortages could cause increased cash prices.