Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for January 3rd, 2006

Hog Markets
Regional (ISM) cash hog bids were slightly higher during the New Year shortened week, while the National Base Cost (NBC) prices were steady. Slaughter for the shortened week was strong reported 1.3% higher than last year’s level. Cutout was slightly lower and has been hovering around 64 for the past 2 weeks. Weights remain high and actually increased slightly through the holidays to 270.5lbs.
The Quarterly USDA Hogs and Pigs report was released on Wednesday December 28 and reported little breeding herd expansion. The number of pigs in various weight stages was reported within trade expectations and should be seen as positive to the industry. Thus, the report supported most contracts but the nearby Feb contract should follow short-term fundamental information. The Feb contract gained U$0.35/cwt but further out contracts, such as the Jun, gained as much as U$1.67/cwt in the days following the USDA report.


Feed Markets
Soymeal futures were steady to lower following the 4 week rally which took nearby prices to their highest level in over 4 months. Speculative buying and commercial pricing drove the market 19% higher from the Nov 28th low. The lack of rain and extreme heat forecast for this week has raised production concerns for the second largest soybean producing country in South America. Argentina’s production is a concern for US price forecasters who have once again increased the South American countries numbers above the record year of 2005. China’s unpredictable buying patterns is also lending strength to the market following reports of 10-12 cargoes being priced split between the US and S. America. End users of soymeal should price hand to mouth on the latest rally and look for a break to purchase a good portion of 2006 requirements.
Corn prices were flat during the past short week as thin trade and year end position taking held futures to a narrow range. Technical buying at the end of last week carried through to Tuesday which saw a higher open as futures borrowed strength from the neighboring soybean market which continues to find underlying support from weather concerns in South America. Cumulative exports for US corn reached 44.6% this past week which is on pace with the five year average for this time of year estimated at 45.4%. Large grain stocks and a predictable demand levels remain negative to the market however speculative buying looks to provide a high degree of volatility going forward regardless of fundamental weakness.