Lower cash prices pull down U.S. hog futures

Chicago Mercantile Exchange hog futures turned lower on Wednesday as U.S. packers slashed cash bids ahead of the Sept. 2 Labour Day holiday, traders and analysts said.

The U.S. Department of Agriculture on Wednesday morning quoted the average hog price in the most-watched Iowa/Minnesota market $3.10 cents per hundredweight (cwt) lower from Tuesday at $85.13 (all figures US$).

Cash hog prices fell for a third straight day pressured by the seasonal increase in supplies.

Hog farmers are sending their animals to market to avoid lower cash prices as the Labour Day holiday approaches. And packing plants will be closed for Monday’s holiday, limiting their need for hogs.

Grocers cut back pork purchases for a third day in row after covering needs for holiday grilling demand.

Wednesday morning’s government data showed the wholesale pork price, or cutout, at $96.20/cwt. The cutout tumbled $5.60 from Tuesday, led by the $15.81 drop in prices for pork bellies, which are made into bacon.

Pork belly values were hit hard as the summer bacon-lettuce-tomato season winds down, said traders.

They said speculative investors sold deferred CME hog contracts in the belief that cheaper corn will increase hog production.

October hogs finished 0.525 cent lower at 86.05 cents/lb. while December ended down 0.4 cent to 83.15 cents.

Cash ideas lift live cattle

CME live cattle settled moderately higher on short-covering in anticipation of at least steady cash prices this week, traders and analysts said.

Cash cattle bids in Texas and Kansas stood at $121/cwt against $125 and higher asking prices, feedlot sources said.

Last week, cash cattle traded at mostly $123/cwt in Texas and Kansas, and $125 in Nebraska.

Mixed to higher wholesale beef prices the past five days is supportive for cash prices. Consistent beef demand suggests packers are buying product beyond the Labour Day holiday.

USDA Wednesday morning reported the wholesale choice beef price, or cutout, at $196.74/cwt, up 65 cents from Tuesday. Select cuts slipped 47 cents to $185.17.

Investors may buy futures if the cutout moves higher, which increases the chances of packers paying more for cattle, Doane Advisory Services economist Dan Vaught said.

Deferred live cattle contracts rose slightly on the prospect that tighter cattle numbers would support cash cattle values at that time.

Spot August live cattle ended 0.35 cent higher at 123.3 cents/lb. Most-actively traded October closed up 0.2 cent, to 126.925 cents.

Feeder cattle futures at the CME finished steady to higher.

Spot-August feeder cattle was led by the exchange’s feeder cattle index which was at 155 cents. That contract will expire on Aug. 29.

Spot August feeder closed unchanged at 154.725 cents.

Firm deferred-month live cattle and weaker corn prices boosted remaining CME feeder cattle futures.

Most-actively traded September finished 0.650 cent higher at 155.925 cents and October at 157.625 cents, 0.675 cent higher.

— Theopolis Waters reports for Reuters from Chicago.

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