U.S. livestock: CME hog futures close higher but off session tops

(Scott Bauer photo courtesy ARS/USDA)

Chicago | Reuters — Chicago Mercantile Exchange hog futures closed higher Wednesday in anticipation of tighter supplies linked to the porcine epidemic diarrhea virus (PEDv), traders said.

May hogs, which expired at noon CT, settled unchanged at 112.4 cents per pound (all figures US$).

June ended 0.975 cent higher at 120.575, and July up 1.5 cents at 126.9.

CME hogs received an initial boost from short-covering and fund buying following higher prices for market-ready, or cash, hogs on Tuesday. Futures eased from highs after cash prices retreated on Wednesday.

Given the volatile cash hog market, and to rationalize June’s premium to CME’s hog index at 113.32 cents, it has to confirm PEDv impact peaking around July and August, said independent livestock futures trader Dan Norcini.

The afternoon’s hog price in the Iowa/Minnesota market slipped 58 cents per hundredweight (cwt) from Tuesday to $109.33, said the U.S. Department of Agriculture.

Packers resisted spending more for hogs while trying to improve their margins amid sputtering retail pork demand.

Product sales may improve within the next two weeks after the late start of spring curbed meat demand, said Norcini.

Pork packer margins for Wednesday were at a negative $6.35 per head, compared with a positive $2.70 on Tuesday and a negative $13 a week ago, as calculated by HedgersEdge.com.

USDA data showed the afternoon’s wholesale pork price up $1.30/cwt from Tuesday to $112.92.

Cattle rise on discounts

CME live cattle gained on short-covering and futures’ price discounts to last week’s prices for slaughter-ready, or cash, cattle, traders said.

It is risky to be short futures with June at about 137.45 cents, which is undervalued based on where cash prices traded last week, said Oak Investment Group president Joe Ocrant.

Last Friday, cattle in Texas and Kansas moved at $146/cwt, and up to $150 in Nebraska.

Investors are looking for a steady-to-lower cash cattle trade.

Processors are awaiting a seasonal supply buildup to help them avoid raising bids for cattle while improving their margins, said Ocrant.

Investors are keeping a close watch on wholesale beef prices for indications grocers are stocking up on product for Memorial Day holiday cookouts.

Traders adjusted positions before the U.S. Department of Agriculture’s monthly cattle-on-feed report on Friday.

Analysts expect Friday’s data to show April 2014 cattle placements declined from April 2013 due to fewer animals to draw from after several years of drought in parts of the U.S. reduced the herd to a 63-year low.

CME feeder cattle notched a new high, fueled by live cattle market advances and lower corn futures.

May closed up 0.675 cent/lb. at 185.4 cents, and August 0.775 cent higher at 192.45 cents.

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

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