Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for November 29th, 2005

Hog Markets
Cash hog bids were mostly firm in regional markets but lower in the lagged national averages. Regional cash gained each day last week but the gains were small and the overall impact for the ISM was up U$1.22/cwt. National prices were lower due to their lag effect and the NBC ended the week down U$1.25. Live weights have leveled off once again as they declined last week to 269.3 from the record of 270.7lbs but still remain 1lb heavier than last year. Cutout was slightly lower from the previous week but is still relatively high and packer margins remain healthy. Slaughter remains slightly above 2004 but to a lesser degree than what had been the case for the last month.
Lean hog futures were higher this week with new contract highs for many 2006 contracts set on Monday. April through Oct of 2006 contracts all reached new contract highs on Monday as traders factor in pork demand and avian flu concerns. Nearby Dec and Feb contracts were also higher for the week gaining U$2.35/cwt and U$3.13/cwt respectively. There are 12 trading days left before the Dec contract expires. The basis is currently 6.64 which is the widest in lean hog history with this many days to expiry. Thus, traders must see a sharp increase in cash within the next couple weeks. If the increase does not occur, a sharp decrease in Dec futures will result before contract expiry on Dec 14.



Feed Markets
It was a short trading week for soymeal contracts with American Thanksgiving on Thursday Nov 24th, 2005. Throughout the short week however, nearby and future soymeal contracts traded mixed at the beginning of the week and lower the day before and after the Thanksgiving holiday. The week’s losses totaled $3.10 US per short ton. This drop in contract values was in part due to two factors, both from overseas. The first factor is still the demand concern from China after their second confirmed human death from the avian flu was reported. The second factor was due to above average planting and growing conditions in South America. Light rain showers and optimal growing temperatures have the South American soybean crop off to a great start, although acres planted are slightly behind the five year average in Brazil. On Monday Nov 28, 2005 nearby soybean futures traded at its lowest level since February 14, 2005, and closed at $171.70 US per short ton.
The bearish tone in the corn market continues to push futures to new contract lows. Lower than expected export inspections and weekend rains in the corn producing regions of Argentina added to losses from last week. December corn futures fell over 3 cents/bushel US and have dropped by nearly 10 cents in just two weeks. The continuing concerns over the avian flu have put pressure on all feed grains with corn being sensitive to the significant losses seen in the wheat and soymeal markets. This is the major fundamental player right now and will continue to be watched carefully by the market in the next few weeks.