Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for January 24th, 2006

Hog Markets
Cash has bounced back with notable gains in most regional markets after tumbling the previous week. Live bids were up U$5.69/cwt in the ISM, while national markets stayed rather steady as they are lagged and take a little more time to show a reversal. Cutout went down slightly for the week with hams showing weakness and should be seen as a seasonal factor. Dec cold storage was released on Monday showing a decline in total pork of 2% from Nov, 2005 and 11% from Dec of 2004. It should be noted that this is the first time since 2000 that cold storage of pork actually declined in the month of Dec. Slaughter has been higher than 2005 levels but it is expected to level off and become closer to previous year levels. Weights have entered 2006 at all time record highs mainly due to mild weather and cheap feed, which has pressured the pork product market.
Lean hog futures experienced volatile trade last week, gaining one day and losing it the next but ended the week relatively unchanged. The Feb contract still holds a relatively high premium to cash prices so further volatility can be expected in the short term. The lean hog futures market has experienced a lot of downside in 2006 and if the product market firm’s up, a reversal in the recent trend is likely to occur.

Feed Markets
The soymeal market continues to consolidate from its recent highs reached in late December with the nearby contract trading $10.00 from contract lows. Massive soybean stocks and talk of more acres in 2006 are holding the market from making any significant moves upward. Daily cash prices have been affected by the volatility of the Canadian dollar which has traded range bound between 85-87 cents US since the end of November. If planting intentions are indeed as large as expected further weakness is likely to come closer to planting however the presence of weather premiums could prove to make current prices most opportunistic for end users. Scale in buying is recommended on a portion of requirements for the summer months to protect against major local weather scares.
Corn futures and cash both moved lower on seasonal weakness and reports of good growing conditions for South American crops. Rains were seen in corn and bean growing areas of Argentina and Brazil over the last few days easing stress of heat earlier in the month. The market lacks fundamental news to move prices in either direction indicating range bound activity in the weeks ahead. Private acres estimates were released from the industry early this week with projections of lower corn acres by as much as 2.34 million.