Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 15th, 2005

Hog Markets
Cash hog bids were slightly higher in regional and national markets this week. Weights took a breather a couple weeks ago but are now at record levels as they came in at 269.6 lbs while last year they were 266.8 lbs. Cutout was higher from the previous week with loins, picnics and hams all gaining in value. This increase indicates that exports remain strong as these 3 cuts are major export products with loins going to Japan, picnics going to Asian countries such as Korea, and hams going to Mexico. Slaughter remains at 3% to 4% higher than 2004 levels, which coupled with the high weights would normally lead to lower hog and product values, however demand remains high and is driving this market.
Lean hog futures were slightly lower this week after a sharp increase last Monday. Dec and Feb contracts were down U$0.40 and U$0.95 respectively. The Apr contract was the only contract that registered a slight gain. On Monday Nov 7, all contracts gained significantly and saw the Jun and Jul contracts touch their limit up value of U$2.00 briefly in that session. Since the surge on Monday, lean hog futures have traded in a choppy sideways trend. Lean hog futures are expected to trade choppy until there is a definitive bias to which direction this market is headed.

Feed Markets
Cash delivered soymeal prices were higher than a week earlier following a $6.00 US rally on Friday. Bearish production numbers released last Thursday appear to have already been priced into the futures market limiting further downside from the lows of late October. Soybean production was estimated at 3.043 billion bushels in the Nov report up from 2.967 billion last month. An increase to yields of just over a bushel per acre added to the expected soybean supplies. The cost of freight has been a large influence on the price of soymeal over the past month and will likely continue to add premiums going forward. Forward contract soymeal prices for a year have moved approximately $20.00 Can from the lows, a function of firmer basis, a recent drop in the Canadian dollar and slightly higher soymeal futures.
Trade action in the US corn market following last weeks USDA production numbers has surprised market participants with futures trading mostly higher, up 2 cents per bushel from a week earlier and 6 cents from the lows. The confirmation of a large US corn crop and increasing ending stocks for the upcoming season provided the bearish news expected by the industry but oversold conditions and speculative buyers did not allow corn drop. Corn production for the 05/06 marketing year was increased to 11.032 billion bushels with ending stocks projected at 2.319 billion. Although the market appears to have leveled off producers are encouraged to price corn hand to mouth given available stocks.