Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for April 11th, 2006

Hog Markets
Live hog bids were down this week in both regional and national markets with the lag effect softening the drop in the national averages. The ISM and corn-belt markets experienced their normal pre-Easter weakness. Similar to the regional cash, cutout also experienced seasonal weakness with most primal cuts declining in value. Weekly slaughter was reported 0.6% above 2005 and is now the 3rd consecutive week of slaughter within 1% of last year. Prior to the last 3 weeks slaughter numbers exceeded 2005 by 3-4%. Hog flows appear to be lessening providing the strength expected to raise meat values in the coming weeks.
Lean hog futures continue to be pressured by bearish short term fundamentals and fund selling as open interest continues to soar. Traders and funds are reluctant to insert any value into the lean hog futures market due to where we are in the hog cycle, avian flu concerns, and an abundance of protein on the market. Once the market is through this short term weakness and into the seasonal rally, lean hog futures should begin to rebound, albeit slightly subdued because of the present uncertainty in the market. Apr ended the week down 4.32, while Jun, Jul, Aug, Oct, and Dec ended the week -2.77, -2.42, -2.12, -1.25, and, -0.82 points respectively.

Feed Markets
Contract lows in the nearby and new crop soymeal futures were reached Monday providing further hedging opportunity at the lowest price seen so far in 2006. Strength in the Canadian dollar which approached 87.50 cents US contributed to the lower deliverable prices in Canada. The USDA reported S/D numbers Monday morning leaving US soybean ending stocks unchanged from the March report at 565 million bushels but below industry estimates. Plenty of talk continues to be centered on weakening demand, good harvest progress in South America and projections for a large soybean crop in the US. Although all of these factors are negative to the market a good portion of the fundamental weakness has already been priced into the futures. Major upside is not expected however the downside appears limited heading into planting.
Corn carry out for the 2005/2006 crop year was estimated at 2.301 billion bushels by the USDA. The figures were down slightly from the March report on increased exports and strong demand expectations but not as low as industry participants expected. Nearby futures are higher than last week but were unable to generate new interest following the USDA report on bearish weather. Planting has begun in very southern regions while central and northern areas will need time to dry out before getting into full swing. Price volatility can be expected to increase going forward meaning big swings in both directions depending on the forecast and actual weather. Buying on breaks would provide protection in a long-term bull trend which the market appears to be setting up for.