Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 22nd, 2005

Hog Markets
Cash hog bids were sharply lower in regional markets but downside was lagged in the national averages. Lower bids were attributed to seasonal trends as cash tends to decline considerably entering the Thanksgiving shortened week in the US. In addition to the seasonal weakness, a large plant in Iowa was shut down on Wed to Fri due to an accident that saw one employee killed. This plant is expected to be running at capacity again by Wed Nov 23, just before the holiday. Live weights have again been reported at record levels, reaching 270.7lbs, 3.7 heavier than last year. Cutout was higher from the previous week by U$1.56/cwt. This increase and strength in cutout during a period of time that normally produces lower product values gives a good indication that demand is strong for pork products. Slaughter remains slightly above 2004 but not to the degree that it has been for the past 3 to 4 weeks.
Lean hog futures were lower this week after a sharp decrease during Monday’s trade. The nearby Dec reacted to sharply lower cash trading limit down during the session and ended the week U$ 2.70 lower. All 2006 contracts ended slightly lower but long term fundamentals remain positive. Trading for the past 5 days has been very volatile due to the lack of market direction. Cash has been experiencing seasonal declines causing weakness but product values have remained strong, which has put value into the market. This combined with a number of other factors has caused lean hog futures to trade in huge ranges from one day to the next.

Feed Markets
Nearby and future soymeal contracts traded sharply lower over the past week with losses on Wednesday and Friday totaling $10.00 US per short ton. The sell off was attributed to demand concerns following an unofficial news release from China reporting over 300 deaths linked to the spread of bird flu with evidence of human to human infection. Although the release was never confirmed soymeal futures were unable to recover on fears of more bird flu in the world and weakening demand for poultry. Production numbers from the latest USDA report also provided little support with ending stocks now forecast well above the previous year which had a final yearly average of $180.90 US per short ton versus current forward prices of $177.50.
Corn futures continued to trade in the well-defined down-trend dropping once again to contracts lows during several sessions in the past week. Futures were able to trade through the low of 2004 which registered at $1.91 US per bushel generating technical weakness. Cash prices in the central Midwest were mixed with slow producer selling providing some strength to cash bids but the overall weakness in the feed grain market limiting any major upside to price. Although little upside is expected through the remainder of 2005, the US corn market may need more than just current fundamentals to force another move lower in the futures.