Chicago Mercantile Exchange (CME) lean hog futures climbed to a 9-1/2-month high on Wednesday as fund buying lifted nearby trading months beyond a key technical resistance level, said analysts and traders.
June and July hogs broke through their respective 100-day moving averages of 92.93 and 92.95 cents per pound, which stirred short-covering (all figures US$).
CME June hogs closed up 2.15 cents to 94.55 cents and July ended at 93.425 cents, up 1.675 cents.
Strong wholesale pork prices, the result of grocers and restaurateurs topping off inventories for the May 25-27 U.S. Memorial Day holiday, encouraged June futures’ buyers.
The U.S. Department of Agriculture’s Wednesday afternoon mandatory wholesale pork price, or cutout, calculated on a plant-delivered basis was $94.34 per hundredweight (cwt), up 65 cents
June hogs benefited from bullish spreads with traders buying nearby months selling deep deferred months as corn prices rallied. Cheaper corn might cause livestock producers to feed more hogs and cattle and to heavier weights.
CME hogs in after-hours trading eased from session highs following USDA’s monthly cold storage report. The data showed April pork stocks at 698.8 million lbs., the highest ever for the month.
“This is a clear record for the month of April, blowing by last year’s 660 million-lb. record. The only thing we can talk about here is the loss of exports, particularly to Russia,” said Allendale Inc. chief strategist Rich Nelson.
Russia in February banned U.S. beef, pork and turkey imports over a dispute about the feed additive ractopamine — a growth stimulant to make meat leaner.
Cattle drop with cash
Despite record-high beef values, CME live cattle futures fell in response to lower preliminary cash cattle prices, traders and analysts said.
A light number of cash-basis cattle in Texas traded at $124/cwt, down $1 from last week, feedlot sources said. Cash bids and asking prices elsewhere in the state and the U.S. Plains stood at $127, they said.
“The cutout continues to put up records but packers are buying for a holiday-shortened kill week next week,” said EBOT Trading analyst John Kleist.
USDA data on Wednesday afternoon showed the wholesale price of choice beef, or cutout, up 54 cents to $211.20/cwt, edging out the previous high of $211.04 set Wednesday morning.
June and August live cattle losses mounted after both months fell below their 10-day moving averages of 120.29 and 119.95 cents, respectively.
June cattle closed at 120 cents, 1.1 cents/lb. lower, and August ended down 1.15 cents at 119.225 cents.
The U.S. government’s storage report pegged beef stocks last month at 510 million lbs., down slightly from March and two per cent from last year.
“The year-over-year decrease fits in with a normal demand month which is actually good news,” said Allendale’s Nelson.
CME feeder cattle slumped with the lower live cattle market. Traders also cited higher corn prices that could curb feedlot demand for younger cattle.
Spot May, which will expire on Thursday, closed down 0.275 cent/lb. to 131.625 cents.
August settled at 144.325 cents, down 2.15 cents, and September finished down 2.2 cents to 146.7 cents.
— Theopolis Waters reports for Reuters from Chicago.