Chicago Mercantile Exchange hog futures slumped Thursday in anticipation of lower-trending cash hog prices, traders and analysts said.
Mixed cash hog returns on Thursday suggest negative margins prompted some packers to reduce slaughter, which should underpin the cutout, a trader said.
Other processors may curb slaughter rates after they pad inventories for the rest of this week’s production, he said.
The U.S. Department of Agriculture’s Thursday afternoon data showed the average hog price in the western Midwest up $1.36 per hundredweight (cwt) at $100.06, and down $0.30 to $92.14 in the eastern Midwest.
USDA quoted Thursday afternoon’s mandatory wholesale pork price or cutout, calculated on a plant-delivered basis, at $99.56 per cwt, $1.25 higher than on Wednesday.
HedgersEdge.com calculated U.S. pork packer margins on Thursday at a negative $4.35 per head, compared with a positive $0.05 on Wednesday and negative $1.95 a week ago.
Far CME hog contracts led losses after those who had placed long bets took profits as corn prices edged lower. Cheaper corn may cause producers to feed more hogs and cattle and nourish them to heavier weight.
“With corn being down, the prospects of expanding pork production are quite great,” Linn Group analyst John Ginzel said.
August hogs closed at 98.575 cents per lb, or down
0.350 cent. October closed 0.650 cent lower at 85.975 cents.
MIXED CATTLE AMID SPREADS
CME live cattle settled mixed in choppy trading. Spread traders bought August and December futures and sold the October contract, analysts and traders said.
Improved wholesale beef values motivated August futures’ buyers, a trader said. The pullback in beef prices prior to Wednesday enticed end users, he said.
The government on Thursday afternoon reported the wholesale price of choice beef at $187.66 per hundredweight (cwt), which was up 77 cents from Wednesday. Select cuts gained 48 cents to $182.70 cents.
Sentiment that futures could come down to the level of cash cattle prices stirred selling. And less-profitable margins may convince packers to curtail slaughter and cut cash bids next week.
This week, cash cattle in Texas and Kansas sold at $119 per cwt, which was steady with last week, feedlot sources said. Live-basis cattle in Nebraska fetched $120.25, up $0.25 from a week ago, they said.
August live cattle closed at 121.650 cents, or up
0.075 cent per lb and October closed at 125.500 cents, or down 0.175 cent.
Profit taking and weak deferred CME live cattle dragged down feeder cattle futures.
August closed at 152.350 cents, or 0.675 cent per lb lower and September at 155.775 cents, down 0.600 cent.