Chicago | Reuters — Chicago Mercantile Exchange hogs closed lower on Thursday, pressured by uneasiness about cash hog price direction amid ample supplies and slim packer margins, traders said.
On Thursday, packers processed 413,000 hogs, 17,000 more than last week and up 8,000 from a year ago, the U.S. Department of Agriculture said.
Pork packer margins were at a positive 25 cents per head, compared with a negative $6.35 on Wednesday and a negative $7.80 a week ago, as calculated by industry analytics firm HedgersEdge.com (all figures US$).
Packers appear to have all the hogs they need heading into next week when they will buy supplies for the U.S. Memorial Day holiday-shorted workweek, a trader said.
Futures are overpriced based on CME’s hog index, at 112.91 cents, which discouraged buyers, traders and analysts said.
They said lower Chicago Board of Trade corn prices exerted more pressure on summer hog contracts.
“With cheaper corn comes ideas of livestock expansion,” said University of Missouri economist Ron Plain.
Deep-deferred hog contracts gained on short-covering and anticipation of tight supplies pegged to the porcine epidemic diarrhea virus on farms.
June hogs ended 1.15 cents lower at 119.425, and July fell 1.55 cents at 125.35.
Cattle drop with cash prices
CME live cattle closed lower on profit-taking in response to initial lower prices for market-ready or cash prices, traders said.
A small number of cash cattle in Nebraska moved at $147.50, compared with $148 to $150 last week, feedlot sources said.
Processors are keeping a lid on cash cattle prices, knowing a seasonal increase in supplies is imminent, a trader said. Some packers cut kills to improve their margins and underpin wholesale beef values, he said.
HedgersEdge.com put beef packer margins at a negative $27.20 per head, compared with a negative $18.50 on Wednesday and a positive 20 cents per head a week ago.
Fund liquidation sank August futures after it drifted below the 10-day moving average of 137.83 cents.
Futures could chop around on Friday as traders digest subsequent cash cattle prices while positioning before Friday’s USDA monthly cattle-on-feed report.
Analysts expect the 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 United States reduced the herd to a 63-year low.
CME feeder cattle close mixed, supported by lower corn prices but pressured by weaker live cattle futures.
May closed up 0.75 cent/lb. at 186.15 cents, and August down 0.025 cent at 192.425 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.