Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for August 9th, 2005

Hog Markets
Hog prices found strength again last week, adding as much as $3.00 in what has become a counter seasonal rally. Unlike most years when prices are lower in July and August then they are in June, this year has had the opposite price movement. The strong cash market is not expected to last, however. It is widely believed that the higher cash hog prices has been the product of hot weather which has slowed marketings and reduced weights. As we move into the end of August, numbers will start to increase seasonally and weights should pick up again.
We expect that prices will start to drop in the week’s ahead and this will weigh on the futures market as well. The Oct contract has already priced much of this in; it is trading at a $10.20 discount to the Aug contract, which goes off the board this Friday. This is a slightly larger discount than normal. Over the past 5-years the Oct has averaged a $9.00 discount to the Aug at expiry.

Feed Markets
Spot soymeal prices for the month of Aug dropped early this week as favorable weather pressured nearby and new crop soybean and meal futures. Crop conditions for the 2005/06 season are again lower this week reported at 51% good/excellent versus 54% the week before. Forward contract prices for soymeal for the next year have dropped to within $20.00 per mt of the lows seen earlier this year. Basis from the packers however is not favorable to producers due to uncertainty over how well harvest will be. Although ending stocks for the current marketing year are pegged near 350 million bushels, crushers have indicated meal availability may tighten as we enter the time of year ahead of US harvest when beans become scarce.
Nearby cash corn prices dropped during the past week pressured by lower futures which are being restricted by calls for rain later this week. Crop conditions were reported down 1% from the previous week with good/excellent acres at 52% versus 73% last year and the 15 year average of 59%. Later this week the USDA Supply Demand report is expected to provide market direction but with weather still front and center it may take another few weeks before supply concerns are raised in the market.