Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for December 15th, 2005

Hog Markets
Midwest cash hog markets ended the week relatively unchanged but national prices recorded gains. Iowa S. Minn prices gained for most of the week but softened on Friday and Monday to end flat for the week. National prices continued their gains as the NBC was U$2.27/cwt higher. Live weights seem to have leveled off once again and came in at 271.2lbs, 0.3lbs less than the week prior and 2.7lbs higher than a year ago. Cutout performed similar to the regional cash markets as it was quoted flat. Slaughter remains above 2004 levels at 1.3% higher.
Lean hog futures ended the week lower with the nearby Dec contract losing the most as it is forced to merge with the CME cash price on Dec 14th. Most contracts were between 47 and 80 points lower for the week with most of those losses occurring Monday after the announcement that the Japan border with open to North American beef imports. This recent weakness is expected to subside as fundamentals remain good for the 1st quarter of 2006.

Feed Markets
The lack of follow through selling on Friday after bearish demand numbers were released by the USDA initiated short covering by funds sending the soy complex sharply higher to start this week. March soymeal traded to its highest level since Sep 6th with all other contracts reaching 3-month highs. A surge higher in Chinese soybean prices offered underlying support as reports of increasing demand from China interested traders. No new cases of bird flu in China so far in the month of Dec have soybean sellers anticipating increased demand into 2006. Soymeal basis levels in the Midwest have firmed supporting cash delivered prices and with futures sharply higher, the lows of the year look to be behind us. Fundamentally the market remains weak with soybean ending stocks now pegged at 405 million bushels but with weather in South America turning dryness, downside from this point looks to be a buying opportunity for hog producers.
Corn futures were steady gaining a cent from a week earlier while cash prices across the Midwest added anywhere from 10-25 cents US per bushel. Slow producer selling has limited supplies at the country elevators but extended the massive stocks on farm for this time of year. Export estimates from the USDA were lowered in Friday’s report by 100 million bushels adding to ending stock bringing the total to 2.419 billion versus last year at 2.112. The corn market is expected to extend it current trend however losses look to be kept in check with domestic consumption. Flows of US feed corn into Canada look to slow significantly at midnight on Wednesday, December 15th in conjunction with the imposed corn tariff.