Chicago Mercantile Exchange hog futures closed higher on Thursday, lifted by strong wholesale pork values in tight seasonal supplies, analysts and traders said.
CME June hogs settled up 0.95 cent to 92.875 cents per pound while July closed at 92.55 cents, or 0.7 cent higher (all figures US$).
Wholesale pork values proved solid all week as grocers stocked up on fresh meat to feature during the May 25 U.S. Memorial Day holiday weekend, a trader said.
The U.S. Department of Agriculture’s Thursday morning mandatory wholesale pork price, calculated on a plant-delivered basis, was $92.72 per hundredweight (cwt). That was up 52 cents from Wednesday and the highest price since USDA began the dataset in January.
Spot-June hogs led advances with help from bullish spreads. Upward futures’ momentum briefly carried the spot month above the 100-day moving average of 93.25 cents where fund buyers awaited.
CME hogs returned below the 100-day moving average as concerns that cash hog and wholesale prices are about to peak seasonally weighed.
“I saw a reason to buy futures given that 100-day moving average and a reason to sell based on talk of lower cash prices soon,” said independent hog futures trader James Burns.
The average hog price on Thursday morning in the most-watched Iowa/Minnesota market was $89.42/cwt, $2.03 lower than on Wednesday.
Processors are reducing slaughter rates to offset the seasonal decline in hog numbers and recover their lost margins. And packing plants will be closed on Memorial Day, limiting their need for supplies.
From Monday to Thursday, packers processed 1.623 million hogs, down 11,000 from a week earlier and 19,000 fewer than a year ago during the same period.
And U.S. pork packer margins on Thursday were estimated at a negative $7.10 per head, compared to a negative $6.30 on Wednesday and a negative $12.40 a week ago, according to HedgersEdge.com.
Cattle dip despite beef record
CME live cattle futures posted modest losses, with some contracts marking new lows, in anticipation of record-high beef prices topping out soon, analysts and traders said.
And investors adjusted positions ahead of the government’s monthly cattle-on-feed report to be released on Friday at 2 p.m. CT.
Analysts expect the data to show the number of cattle placed in feedlots last month likely rose year-over-year as feed costs fell.
June closed at 119.9 cents, down 0.1 cent/lb.
August ended down 0.125 cents to 119.725 cents before drifting to a new contract low of 119.325 cents in after-hours trading.
Government data quoted wholesale price of choice beef, or cutout, on Thursday morning at $208.99/cwt, eclipsing the previous record set Wednesday morning at $208.18.
“Granted we’ve got some pent-up spring grilling demand leading into Memorial Day, but that should taper off soon afterwards,” a trader said.
And cattle numbers tend to rise this time of year giving packers’ leverage in negotiating prices, he said.
Thursday morning, cash-basis cattle in Texas traded at $125/cwt, down $1. Cash bids elsewhere in the state and the Plains stood at $125 against $127 or higher asking prices, said feedlot sources.
Even though cash prices fell short of CME traders’ expectations, they remain well above where futures are currently trading at around 120 cents/lb.
CME feeder cattle closed in line with the weaker live cattle market.
May feeder cattle closed at 135.025 cents, down 0.05 cent per lb. It drifted to a fresh contract low of 134.75 cents in after-hours trading.
August settled at 145.125 cents, down 0.175 cent.
— Theopolis Waters is a Reuters correspondent in Chicago.