Chicago | Reuters –– Chicago Mercantile Exchange hog futures turned higher on Wednesday, supported by bargain hunting and short covering after 2-1/2 days of losses, traders and analysts said.
Investors cited futures’ discount to CME’s hog index that touched a record high at 125.04 cents, surpassing the March 21 record of 122.57 (all figures US$).
“People finally realized that the index kept climbing. When it came out, we immediately started rallying in the April contract,” said JBS Trading Co. president James Burns.
Advances pushed the April contract through the 10-day moving average of 122.683 cents, which triggered fund buying.
The market gained upward traction despite recently downward trending prices for market-ready or cash hogs.
Wednesday morning’s hog price at the closely watched Iowa/Minnesota market declined for a third straight session, sliding $2.28 per hundredweight (cwt) from Tuesday to $124.29, according to USDA.
But CME hogs shrugged off early selling pegged to jitters ahead of Friday’s U.S. Department of Agriculture quarterly hog report.
Analysts’ estimates for Friday’s report varied widely reflecting uncertainty about how much the data will account for the porcine epidemic diarrhea virus’ (PEDv) impact on U.S. farms in recent months.
April finished up 0.825 cent per pound to 122.475 cents, and June finished 1.1 cent higher at 126.3 cents.
Cattle up with cash
Record-high prices for slaughter-ready or cash cattle lifted CME live cattle for a third day in a row, traders said.
“I think this cattle deal is going off higher cash from yesterday,” said R.J. O’Brien floor manager Jim Brooks.
On Tuesday, cash cattle in Texas and Kansas fetched a record of $152/cwt, and Nebraska cash cattle hit a $154 record, feedlot sources said.
Tuesday’s cattle sales implied packers were desperately short bought supplies, a trader said. Higher cash prices and the unstable beef cutout reduced packer margins, he added.
HedgersEdge.com calculated the beef packer margins for Wednesday at an estimated positive $0.75 per head, compared with a positive $5.65 on Tuesday and a positive $31.75 a week ago.
The morning’s wholesale choice beef price rose 80 cents/cwt from Tuesday to $242.05. Select cuts dropped 76 cents to $233.69, based on USDA data.
Futures’ discount to this week’s cash cattle returns encouraged buyers.
Fund buying surfaced after the June live cattle punched through the 10-day moving average of 137.222 cents.
April live cattle closed up 1.425 cents/lb. to 145.8 cents, and June ended 1.2 cents higher at 137.625 cents.
Higher CME live cattle and weak prices for corn sent feeder cattle futures to a record high for a fifth consecutive session.
March, which will expire on Thursday, ended up 0.725 cent/lb. at 177.95 cents, and hit a new contract high of 178.05 cents in electronic trading. April closed 1.275 cents higher at 178.625 cents, after posting a fresh contract high of 178.925 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.