Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for May 23rd, 2006

Hog Markets
Live hog supplies have been steady and on the verge of tight in most regions across the US. This lack of abundant supply is why for two consecutive weeks cash prices have increased Monday through Friday by approximately $3 US/cwt, however, week over week the average price has remained virtually the same. Cash calls for this week are steady with a suspected near-term top in cash ahead of next week’s Memorial Day. Packer margins have begun to feel the squeeze due to higher cash but cutout did do its part by increasing to a high of $70.58 US/cwt last Tuesday—its highest level in 9 months. Last week, the USDA reported record high pork export levels for the month of March and cold storage stocks below last year.
Week over week lean hog futures gained value across the board with the exception of the October contract which closed lower. Nearby June and July added a dollar as did the December and February ’07 contract. News of empty finishing spaces in the Midwest has supported deferred contracts as fewer animals appear to moving south out of Canada. Hog futures were lower to start this week on producer hedging as Dec futures reached contract highs at the end of last week.

Feed Markets
Soymeal futures were down just over $5.00 US from a week earlier lowering cash deliverable prices. Supportive news in the bean and meal markets has been hard to find with a big production slated for the coming year and steady demand expected. Excellent growing conditions across much of the Midwest for the next week is supportive to good planting progress and crop development. Weakness looks to continue until weather disruptes the current trade direction. Recent losses in precise metal commodities including gold and energy markets have added to the selling pressure seen in the beans.
Corn futures rallied at the start of last week in reaction to a tighter than expected supply/demand report for the 2006/07 marketing year. Nearby futures experienced profit taking and technical selling following the upward surge in prices. Weather is favorable for crop development which came in at 66% good to excellent for the first reported number versus the 16-year average of 68%. Planting has reached 92%, in line with most market projections leaving prices vulnerable to growing conditions. End users should look to cover a portion of grain costs as any disruption to the current growing season could lead to a much tighter than expected supply situation.