Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for September 6th, 2005

Hog Markets
Cash hog prices dropped sharply at the end of last week in anticipation to the ample hog flows given one less kill day this week. Packers continued with lower bids Tuesday as regional prices dropped another $2.00 in the Midwest. Cut-out maintained good value losing only $1.82 US from the week earlier further improving packer margins which typically start to improve going forward with more animals coming to market.
Futures performed well given the cash weakness as analysts suggest the large premium between cash and futures limited negativity to the nearby Oct contract. Fundamentally the market is receiving conflicting information which leaves the futures vulnerable for a move in either direction. The lower than expected slaughter levels for the past 7 weeks coupled with below average weights is supportive, however talk of expansion and increasing flows heading into September has the market trading a bit defensive. Seasonal decrease can be expected in the weeks ahead however major downside looks to be averted given increased shackle space and strong pork demand.

Feed Markets
Soymeal futures found underlying support this week from commercial pricing as concerns grow over this year’s production. Crop condition reports released Tuesday due to the holiday pegged good to excellent acres at 54% up 1 from the week earlier. Expectations within the industry were for a possible decrease in conditions due to the recent dryness seen across the Midwest. The USDA will release production estimates next Monday which will likely contribute to high levels of volatility heading into this weekend. Final yields between 38 and 40 bushels per acre will dictate which direction this market trades for the remainder of 2005 and into 2006.
Corn futures started the short week with a firm tone as reports from the Gulf indicated increased levels of activity which had been expected to be minimal for longer period of time. News that ships were being loaded sent buyers into the market alleviating worries that grain would be back logged in the south. Crop conditions were lower this week as corn enters its next phase prior to harvest. Good to excellent acres were down 1 to 51% versus the 15-year average of 61%.