Chicago Mercantile Exchange hog futures fell on Tuesday in anticipation of lower-trending cash hog prices caused by packers working to improve operating, analysts and traders said.
The U.S. Department of Agriculture data showed the average hog price Tuesday afternoon at the most-watched Iowa/Minnesota market at $95.78 per hundredweight (cwt), down 48 cents from Monday.
Some packing plants resumed operations on Tuesday after closing on Monday for a floater holiday, University of Missouri economist Ron Plain said. Tuesday’s hog slaughter was 407,000 hogs, 52,000 more than on Monday, according to USDA data.
Plain expects a few plants will be dark on the first Monday in August, as they normally would, because hogs supplies are lower then. Processors will ramp up Saturday slaughter operations to make up for Monday downtimes, he said.
The belief that cash hog prices could fall to the level of the October hog contract stirred more futures selling.
Hog supplies usually increase during the fall when cooler weather allows animals to quickly reach market weight.
August hog futures closed at 96.875 cents per lb, or 1.025 cents lower, and October closed at 83.200 cents, down 1.300 cents.
HOGS PRESSURE LIVE CATTLE
CME live cattle were pressured by the selloff in the neighboring hog market, analysts and traders said.
“We’re a competing meat, so when hogs unraveled it took us down right along with them,” a trader said.
Caution about how cash cattle prices would fare this week sidelined futures’ buyers. There were no cash cattle bids or asking prices reported by feedlot sources on Tuesday.
Last week, cash cattle in Texas and Kansas sold steady with the prior week’s $119 per hundredweight (cwt). Live-basis cattle in Nebraska traded at $120.25, up 25 cents from the week before.
Packers may keep a lid on cash bids given their profitable, but thinner, margins and seasonally tepid wholesale beef demand.
The government on Tuesday afternoon quoted the wholesale price of choice beef at $186.78 per cwt, up 37 cents from Monday. Select cuts dropped 56 cents to $181.66 cents.
Nearby CME live cattle contracts briefly dropped below key 100-day moving average support, which prompted fund selling.
August live cattle closed down 0.450 cent at 121.650 cents per lb, but above the 100-day moving average of 121.590 cents. October closed at 125.650 cents, or 0.325 cent lower. That was above the 100-day moving average of 125.332 cents.
Weaker CME live cattle and higher corn prices pulled down feeder cattle futures. Costly corn could curb feedlot demand for young cattle.
August feeders closed at 153.250 cents, down 0.025 cent per lb and September at 156.600 cents, or 0.250 cent lower.