U.S. livestock: Cash price uncertainty weakens CME hogs

(Scott Bauer photo courtesy ARS/USDA)

Chicago | Reuters –– Chicago Mercantile Exchange lean hogs posted modest losses on Wednesday amid uncertainty regarding near-term prices for slaughter-ready or cash hogs, traders said.

October hogs closed 0.425 cent per pound lower at 107.45 cents, and December at 95.2 cents, down 0.05 cent.

The U.S. Department of Agriculture’s Wednesday morning direct cash hog prices were unavailable. Hogs in the U.S. Midwest traded steady to mixed, according to regional hog dealers.

While some processors were buying hogs for this week’s slaughter schedule, others were snug on inventories into early next week, they said.

“Packers might put 50 cents (per hundredweight) on cash prices today and take it back tomorrow,” an Ohio hog dealer said.

Investors have been watching hog weights for signs that cooler fall temperatures could usher in a seasonal upswing in supplies.

From Monday to Wednesday, packers processed 1.252 million hogs, 20,000 more than last week, based on USDA data.

Cash hog price jitters caused investors to sell the October contract and buy back months in a trading strategy known as bear spreads.

Some traders adjusted positions ahead of Friday’s government quarterly hog report. The data will likely show the impact of porcine epidemic diarrhea (PED) and whether low-cost corn stirred herd expansion.

Mixed live cattle settlement

CME live cattle closed narrowly mixed, featuring bear spreads in anticipation of steady or lower prices for market-ready or cash cattle this week, traders said.

October live cattle finished down 0.125 cent/lb. to 155.325 cents, and December up 0.05 cent to 158.775 cents.

Despite talk that some packers need cattle, processors are wrestling with slumping margins and sluggish demand for beef at wholesale.

Last week, cash cattle in the U.S. Plains sold at mostly $159 to $160/cwt, feedlot sources said.

Wednesday’s beef packer margins were a negative $88.50 per head, compared with a negative $64.30 on Tuesday and a negative $55.25 a week ago, according to Colorado analytics firm HedgersEdge.com.

Wednesday morning’s choice wholesale beef price dipped 19 cents/cwt from Tuesday to $238.98. Select declined 24 cents to $227.05, USDA said.

The seasonal retreat in beef demand comes as grocers turn to pork for National Pork Month in October and hams and turkeys for winter holiday advertisements, traders and analysts said.

Speculators bought most deferred contracts in anticipation of tight overall cattle numbers during that period.

CME feeder cattle futures reached a new high on buy stops and moderately higher back-month live cattle contracts.

September feeder cattle, which will expire on Sept. 25, closed up 0.175 cent/lb. to 231.075 cents, and October 0.25 cent higher at 230.4 cents.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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