Chicago Mercantile Exchange hog futures rose to contract highs on Monday, fuelled by the turnaround in cash prices, traders and analysts said.
Monday afternoon’s average cash hog price in the closely watched Iowa/Minnesota market was $85.41 per cwt, up 72 cents from Friday, according to the U.S. Department of Agriculture.
December hogs closed up 1.525 cents at 91.950 cents per lb, after posting a new contract high of 92.100 cents in electronic trading.
The December contract also finished at a modest premium to the exchange’s latest hog index, which was at 91.48 cents.
February hogs settled 1.825 cents higher at 94.550 cents. It peaked at a fresh contract high of 94.625 cents.
Futures gained for a third straight session as packers hiked cash hog bids to ensure themselves of supplies for this week’s production. The wholesale pork cutout felt pressure from the seasonal bump in hog numbers at heavier weight.
USDA’s data showed the wholesale pork price, or cutout, was at $94.00 per cwt on Monday morning, down 33 cents from Friday. The $2.49 decline in the price of ham pressured the cutout.
Deferred hog months received an added boost from rising wholesale beef values that might prompt consumers to switch to less-costly pork or chicken.
“We’ve got beef going through the roof, which is contributing to expectations for strong pork demand,” said Brock Associates analyst Doug Houghton.
2014 spring and summer trading months climbed more than 2 percent amid mounting concerns that the spread of the Porcine Epidemic Diarrhea virus (PEDv), which is deadly to baby pigs, can reduce hog production during that period.
On Monday, U.S. government monthly export data for August showed pork exports at 403.6 million lbs, down 0.7 percent from July and 3.8 percent less than a year ago.
“Challenges appear in many forms, including market closures and disruptions, international competition and product oversupply,” said U.S. Meat Export Federation (USMEF) President Philip Seng in a statement.
Cattle futures climb on beef prices
After taking a breather on Friday, CME live cattle resumed their uptrend following Monday’s sizable wholesale beef price increase amid tight supplies, analysts and traders said.
Monday morning’s USDA wholesale choice beef price was $203.41 per cwt, $2.44 higher than on Friday, and surpassed the recent high of $203.18 on June 10. Select cuts surged $2.63 to $188.03.
Last week’s 618,000-head slaughter, and the previous week’s 617,000, were the lowest numbers for those two weeks since 1979 – except for the odd week of Oct. 26, 1991, which had only 583,000 head processed, wrote Steve Meyer and Len Steiner in their Daily Livestock Report newsletter.
Scarce cattle numbers stirred expectations of cash trading at or above last week’s record-high price of mostly $132 per cwt.
Packers may curb cash spending in an effort to counter tight supplies and recapture lost margins.
But processors will likely ask sharply higher prices for beef with their margins deep in the red, said Hales Trading Co President David Hales.
U.S. beef packer margins on Monday were estimated at a negative $52.35 per head, compared with a negative $41.35 on Friday and a negative $55.35 a week ago, according to HedgersEdge.com.
October live cattle futures closed up 0.575 cent at
133.150 cents per lb, with December 0.825 cent higher at
133.800 cents. USDA data showed August beef exports at 239.5 million lbs, down 9.5 percent from July, but up 6.3 percent from a year ago.
“While the United States has enjoyed impressive growth in beef exports to Hong Kong, we remain locked out of the fastest-growing beef market in the world – China,” said USMEF’s Seng.
CME feeder cattle finished higher, supported by live cattle market gains and lower corn futures that could encourage feedlots to buy young cattle.
October feeder cattle closed at 165.975 cents per lb, up 0.425 cent, and November ended at 167.075 cents, 0.425 cent higher.