Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 26th, 2004

Hog Markets
The strong cash price for hogs that has persisted since the first quarter of this year has started to move even higher compared to past years. Cash prices through 2004 have been similar to those seen in 1997, until early October. At this time prices fell in 1997, but have remained strong so far this year. Year-to-date the average cash price is 30% above last year¹s average, but last week the cash price was 60% above last year. The strong market continues to be largely supported by incredible demand and slightly smaller numbers over the past few weeks.
Another possible case of BSE has the market on edge. The general view that another case would slow down opening of markets to US beef, would be positive for pork and likely result in higher futures once it has been confirmed. For most of this year, futures have been undervalued relative to the cash market. This is no longer the case as demand appears to be fully priced into futures for 2005. For most of 2004 futures contracts expired at contract highs. This will not likely happen again in 2005.

Feed Markets
Questionable demand scenarios led to weakness in the US corn market this week as the potential case of BSE raised concerns over the level of domestic consumption. The extremely weak US dollar has not provided the export drive expected by the market as weekly numbers were again reported below expectations. Lower corn futures are expected before commercial users view corn prices as being good value/ A weak tone in the market has also been provided by reports from China of a near record crop and harvest progress in the US reaching 92% versus 86% last week. Hand to mouth purchasing of corn is recommended until later this year when prices begin to reflect changing demand.
Cash soymeal prices increased this week driven by concern over a potential case of Mad Cow disease being investigated within the US. The USDA is expected to report it¹s findings by the end of this week, which could lead to further upside in soymeal if the test is confirmed positive. Tighter feed regulations from the FDA would likely be the result leading to an increased level of demand for soy-based protein. An oversold soybean market added to the upside as technical buying from speculators lifted contracts from the lows set on Nov 8th. Reports of Asian rust discovered in six US states has also raised concern for next years soybean crop and production numbers. Hog producers should view the recent rise in futures as an indication that the lows of the year may now have passed.