U.S. hog futures climb on discount to cash

Chicago Mercantile Exchange (CME) hogs gained Monday, driven by futures’ discount to the exchange’s cash hog index which was at US104.23 cents, traders and analysts said.

CME July hogs settled up 1.2 cent per pound, to 100.95 cents. It marked a new contract high of 101.8 cents in after-hours trading (all figures US$).

August settled 0.575 cent higher, at 98.025 cents.

Bullish spreads and firm wholesale pork values provided more July futures support.

“You’re seeing strong pork demand and you have a premium status of the cash index to futures,” said U.S. Commodities analyst Jason Roose.

Monday morning’s U.S. Department of Agriculture mandatory wholesale pork price report, or cutout, calculated on a plant-delivered basis, was at $107.90 per hundredweight (cwt), up 19 cents from Friday.

The cutout rose as supermarkets topped off inventories for U.S. Independence Day holiday features.

Investors expect mixed cash hog prices the rest of the week. Some packers cut slaughter to offset seasonally tight supplies. Others need to fill this week’s kill schedule.

Hog farmers moved animals to market ahead of schedule before cash prices move lower as the holiday approaches, traders said.

Packers on Monday processed 402,000 hogs — 11,000 more than last week and up 16,000 from a year ago, according to USDA.

Cattle wilt after report

Last Friday’s government monthly cattle-on-feed report pressured CME live cattle futures, analysts and traders said.

The data showed the number of cattle placed into feedlots declined last month but not as some analysts had anticipated.

More cattle could come to market at heavier weight later this year, which could land more beef in the retail sector, he said.

“We’ve got record-high pork stocks last month while beef came down from a year ago. It’s all going to come down to demand in the long run,” U.S. Commodities’ Roose said. He referred to USDA’s monthly cold storage report that was issued last Friday.

Investors await this week’s cash cattle trade. A small number of cattle last week fetched $120/cwt, which was steady with the week before, feedlot sources said.

Ample cattle supplies and weak wholesale choice beef values present challenges for cash this week. And U.S. packers are buying supplies for next week, when plants will be dark at least one day, for July 4 celebrations.

The U.S. government’s Monday morning data showed the wholesale price of choice beef, or cutout, at $199.10/cwt, which was down 29 cents from Friday. Select cuts gained 82 cents, to $187.04.

June finished down 0.3 cent/lb., to 120.90 cents. August closed 0.425 cents lower, at 121.175 cents.

Lower corn prices pushed CME feeder cattle to a 4-1/2-month high. Less expensive feed could reduce feedlots’ input costs.

August settled 0.75 cent/lb. higher at 147.675 cents, and September was at 150.1 cents, or up 0.95 cent.

— Theopolis Waters reports for Reuters from Chicago.

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