Maximum Swine
Marketing Ltd. Newsletter

Hog Commentary for August 8th, 2006

Hog Markets
Cash hog bids were higher in both the regional and national markets due to intense heat and packer incentive to bring hogs to market as margins remain strong. The regional Iowa / Southern Minnesota price was quoted as $1.95 US/cwt higher for the week and the national base cost was quoted as $2.69 US/cwt higher. The strong cash gains were a direct result of the strong performance by the cutout. Cutout was quoted as $3.99 US/cwt higher, strengthening margins and providing incentive to bid higher for hogs. This incentive contributed to another week of high slaughter as it came in 4% higher than the same week last year. Prices and cutout have been very strong considering slaughter has been running at 3.76% higher year over year for the last 4 weeks.
Lean hog futures posted modest gains as strength in cash and cutout sparked buying interest. The demand for pork appears very strong considering the magnitude of slaughter and the direction of cash with traders beginning to work some of this demand into the market. Oct 06 through Jul 07 reached contract highs once again on Monday of this week. Futures ended the week with the following gains Aug: 2.87, Oct: 1.55, Dec: 1.05, Feb: 1.02, Apr: 0.80, May: 0.80, Jun: 0.65, Jul: 1.07 all prices US/cwt.


Feed Markets
Near ideal weather conditions have pushed soybean and meal futures to their lowest level since the spring of 2005. Expectations for a second consecutive year of above average production combined with burdensome US soybean stocks have contributed to the weakness seen in the market over the summer months. Although weather can still affect final yields the crop at 53% good to excellent appears to be on pace with 2005 when yields reached over 2 bushels per acre above trend line. Traders are looking for increased stock projections in this Friday’s USDA report lending further weakness to the price of soymeal. There are reports of soybean harvest in the south which due to the last month’s heat wave is coming in about 2-3 weeks early. The market will be looking for yield reports on the early harvested acres to set direction for the end of this year.
Cash corn prices were steady to lower while futures were unchanged for a 3rd week in a row. The nearby Sep corn futures were mixed throughout the week but ended within a cent per bushel from one and two weeks earlier. Many of the same factors affecting soybeans are pressuring the corn market with the crop in relatively good shape going into its final stages of growth. Support for new crop appears to have surfaced near the low $2.50 per bushel with regions outside of the core of the corn-belt reporting less than ideal conditions and below average conditions. Not until harvest is well underway will the market be able to fully price in this year’s production. Until then expect volatility with a lower bias unless weather changes drastically.