Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for May 9th, 2005

Hog Markets
Market hogs availabe for slaughter have fallen significantly over the past two weeks. Packers have needed to increase bids as a result of few hogs in order to find the supplies they need. The net result of the tighter supplies was a $7.00 increase in cash prices last week, and a similar increase expected this week.
Unlike last year where prices followed cutout values higher, the opposite is happening this year. Cutout only increased by a little more than $3.00 last week. Consequently packer margins have worsened and are reported to be negative. Producers should focus on the cutout value in the weeks to come. If coutout can follow cash prices higher, we will be able to sustain our current valuations. If however, cutout does not keep pace with the increasing cash prices, we would exepct to see cash prices start to drop.
The futures market imporved slightly over the past week, hitting new contract highs in the May and Dec contracts. The June and July contracts are trading steady to a small discount to the cash market. If the coutout is able to post gains, we would expect the summer futures to follow.

Feed Markets
After reaching the $200.00 US per short ton level early last week, soybean and soymeal futures have drifted lower since. Concerns over planting issues have dwindled and forecasts across the US midwest remain promising for the near future. Planting progress which has been slowed over the past few weeks is expected to catch up quickly. The USDA planting was reported as of May 1st at 8% complete which is behind both last year at 11% and the 5 year average of 9%. Funds have also entered the market and selling pressure continues to work with more bearish fundamentals to take some of the planting premium out of the market. The slightly lower futures prices have done little to reduce cash soymeal prices in Canada however, as the weakening Canadian dollar continues to support cash soymeal prices.
Much like the soy market, corn futures have also lost significant value over the past week mainly due to good planting progress. Seeding as of the 1st of May was estimated at 52% which is within the range that the market felt was needed to maintain trend line yield projections. One year ago corn planting had a record pace of 59% complete but the 5 year average remains at only 45%. The nearby corn futures dropped to the $2.00 US per bushel on the first trading day in May establishing a new contract low along with most other contract months as well. The bearish fundamentals have also triggered significant speculative selling pressure which leaves the market struggling for any positive news.