Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for July 20th, 2006

Hog Markets
Regional cash prices were reported as relatively steady for the week while national bids were lower. The ISM was quoted $0.79 US/cwt lower for the week and the lagged national prices were approximately $1.60 lower, which is very similar, to what occurred last week. Packers continue to manage margins very well and have reported profits in excess of $14.00 US/hog. Slaughter for the week was reported as 4.5% above the equivalent week in 2005 and weights have came up slightly. The higher slaughter and weights can be seen as a result of packer reducing kills for 2 weeks prior to the holiday shortened week.
Lean hog futures gained this week despite the weakness in the cash market. July, which expired Monday at $70.22 US/cwt was slightly lower for the week but the remaining contracts ended higher. With the exception of Aug and Oct, all other lean hog contracts are approximately $1.00 US/cwt from their contract highs. The Aug through Feb contracts ended the week as follows: Aug up $1.55, Oct up $1.15, Dec up $1.05, Feb up $0.77, Apr up $1.05, May up $1.25, and Jun up $0.95; all prices US/cwt.

Feed Markets
Soymeal futures traded to new contract lows early this week dropping cash deliverable meal to its lowest price so far in 2006. The soybean market reacted to improving growing conditions and rain in the forecast for the coming week. Although extreme heat was seen in many major bean producing regions of the Midwest ample moisture prior to the heat limited damage to the crop. Soybean conditions reported Monday afternoon declined 1% to 57% in the good/excellent rating. Critical pod filling is underway implying cooler temps would benefit the crop and increase potential yields holding price flat for later this year. Hot and dry conditions would pose a threat to production implying coverage for a portion of meal requirements during the Aug/Sep periods.
Corn experienced very volatile trade as nearby futures climbed 13 cents per bushel before plummeting 23 cents in just one week. Weather provided most of the uncertainty in the market as hot and dry conditions affected corn silking while scattered showers and forecasts for more rain caused liquidation to most contracts. Cash markets were soft to start the week alongside futures as basis held steady. Crop conditions were reported down 1% from last week at 62% but up significantly from last year’s 55% g/e rating.