Chicago Mercantile Exchange hog futures rallied on Wednesday driven by higher cash hog and wholesale pork prices, analysts and traders said.
The U.S. Department of Agriculture data showed the average hog price Wednesday morning at the most-watched Iowa/Minnesota market at $98.66 per hundredweight (cwt), up $2.80 from Tuesday.
Wednesday morning’s USDA mandatory wholesale pork price report, or cutout, was $100.94 per cwt, up $1.64 from Tuesday.
Packers raised cash hog bids as their margins improved, a trader said. And some processors need hogs for the rest of this week’s production, he added.
HedgersEdge.com calculated U.S. pork packer margins on Wednesday at a positive $6.78 per head, compared with a positive $4.05 on Tuesday and a positive $0.05 a week ago.
Some pork plants were closed on Monday for a floater holiday, which reduced the amount of pork available to grocers.
A few processors scheduled their floater holiday on August 5, which is typical this time of year when there are fewer hogs, an economist said. Plants plan to make up the Monday closures on Saturday, he said.
Nearby CME hogs received an added boost from the futures’ discount to the exchange’s hog index, which was 100.98 cents.
Despite Wednesday’s gains in pit and after hours trading, CME hogs were poised to be down almost 4 per cent for the month, which would break a three-month win streak. That loss was due to August futures’ sizable discount to the July contract that expired on July 15 at 102.300 cents.
Pit-traded August hog futures closed at 97.575 cents per lb, 0.700 cent higher, and October closed at 83.325 cents, up 0.125 cent.
CASH DOUBTS PRESSURE LIVE CATTLE
Uncertainty about this week’s cash cattle prices prompted selling that turned CME live cattle futures lower, after early short-covering had pushed the futures higher, traders and analysts said.
The futures’ premium to last week’s cash cattle prices is an issue for the August contract given deliveries next week, said U.S. Commodities analyst Don Roose.
Spotty cash cattle bids surfaced in the U.S. southern Plains at $117 per hundredweight (cwt) with no response from sellers, feedlot sources said. Last week, cash cattle in Texas and Kansas sold at $119 per cwt.
Cash cattle in Nebraska fetched $120.25 then. Some packers need cattle after buying fewer of them in recent weeks. Lackluster wholesale beef demand and less-profitable margins could curb cash spending.
The government on Wednesday morning quoted the wholesale price of choice beef at $186.62 per cwt, down 16 cents from Tuesday. Select cuts rose 56 cents to $182.22.
CME live cattle are set to finish nearly 3 per cent higher for the month and their first gain in four months.
August live cattle closed down 0.200 cent at 121.450 cents per lb and October at 125.475 cents, or 0.175 cent lower.
Firm deferred-month CME live cattle plus short-covering lifted feeder cattle futures.
CME feeder cattle are up nearly 3 per cent for the month. That would be their fourth straight monthly increase.
August feeders closed at 153.425 cents, up 0.175 cent per lb, and September at 156.975 cents, or 0.375 cent higher.