U.S. livestock: CME hog futures biggest one-day loss in seven months

Chicago / Reuters – Chicago Mercantile Exchange lean hogs on Wednesday slumped nearly four per cent, their biggest daily decline since mid-December 2015, pressured by day’s steep wholesale pork price drop and further cash price weakness, traders said.

August hogs finished 2.925 cents per lb lower at 71.675 cents. October ended 2.575 cents per lb lower at 61.050 cents.

Cash hog prices in the Midwest on Wednesday morning were mostly steady to 50 cents per lb weaker as some plants prepare for an annual industry floater holiday on Monday, said Midwest hog merchants.

Wednesday morning’s wholesale pork price tumbled $4.01 cents per cwt from Tuesday to $82.50, led mostly by the more than $21 drop in pork belly prices, the U.S. Department of Agriculture said.

Pork belly values are re-adjusting after speculators late last year and in the spring of 2016 drove up prices in anticipation of seasonally tight summer hog supplies, said Doane Advisory Services economist Dan Vaught.

But two recent USDA reports showed record high hog numbers and significant amounts of pork bellies in U.S. cold storage warehouses, he said.

August futures bore the brunt of the day’s selloff after investors sold it and simultaneously bought deferred months in response to Wednesday’s bearish market fundamentals, said traders.

Firm live cattle futures

CME live cattle gained a fourth straight session on futures’ discounts to expected cash price by Friday, traders said.

August live cattle ended up 0.075 cent per lb at 113.950 cents, and October settled 0.475 cents higher at 113.050 cents.

Investors believe healthy profits will motivate packers to pay the same or more for market-ready, or cash, cattle than last week.

There are also fewer cattle for sale this week. And cash prices along with beef demand typically bottoms out seasonally around late July or early August.

So far, feedlots priced cash cattle at $120 per cwt with no bids from packers that a week ago paid $115 for supplies.

Average beef packer margins for Wednesday were a positive $45.60 per head, up from a positive $29.25 on Tuesday, as calculated by HedgersEdge.com.

The morning’s choice beef price was up four cents per cwt from Tuesday to $199.97. Select cuts slipped 22 cents to $190.60, the USDA said.

CME feeder futures were pressured by profit-taking, but supported by live cattle contract gains. August feeders closed down 0.175 cent per lb to 142.275 cents, and September ended up 0.100 cent to 141.125 cents.

Editing by Diane Craft

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