Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for May 31st, 2005

Hog Markets
The Memorial Day long weekend south of the border coincided with weaker cash hog prices to start the week. Lower bids are likely to continue until Thurs/Fri when packers are expected to add money to attract hogs for a Saturday kill making up for lost production on Monday. Industry expectations include higher meat values into the month of June and firming cash prices.
Lean hog futures which were devalued with the collapse of the cash market appear to have bottomed trading steady week over week. Fourth quarter contracts which have traded range bound for the past 2 months are seeing increased volatility as commercial hedging occurs. Similar years comparable to 2005 have provided hedging opportunities for the end of the year during the month of June. Hog producers should be aware that typical downward price action is likely into the end of 2005 however current futures levels could provide protection against some of that downside.

Feed Markets
Cool dry weather across the US midwest has continued to give the soy market reason to increase the current weather premium. After closing higher and setting new contract highs in many of the soymeal contracts for five consecutive days, futures took a breather Friday in advance of the long weekend. Strong buying pressure has left the market in an overbought condition and forecasts for better weather over the weekend provided a profit taking opportunity on Friday afternoon. The favourable weather however did not materialize with the markets opening Tuesday significantly higher. Sensitive new crop soybean supply numbers will continue to have the market in volatile trade and suceptible to weather premiums. A good stretch of weather in June can still right this crop and enable to market to drop the premiums. If the weather remains less than favourable, premiums however will continue to grow.
Much like the soymeal market, corn futures have also continued to build a premium as the markets watch the weather. Promising forecasts for the weekend provided a selling opportunity on Friday and illustrated how closely the market is following the forecasts. With less rain over the weekend than what was hoped, selling eased overnight and into Tuesday morning’s trade. With corn planting essentially wrapped up, emergence and crop progress numbers will have to improve if the market is to let go of the current premiums.