U.S. livestock: CME hog futures fall with cash, pork prices

(CMEGroup.com)

Chicago | Reuters — Chicago Mercantile Exchange lean hog futures slumped more than two per cent on Wednesday, pressured by lower prices for slaughter-ready or cash hogs and pork at wholesale, traders said.

October closed 1.775 cents per pound lower at 105.1 cents, and December at 93.9 cents, down 2.025 cents (all figures US$).

Wednesday morning’s average hog price in Iowa/Minnesota dropped 86 cents per hundredweight (cwt) from Tuesday to $103.76, the U.S. Department of Agriculture said.

USDA data showed the morning wholesale pork price sagged $1.46/cwt to $109.29, pressured by the downward adjustment in ham costs following Tuesday’s sharp spike.

Investors took profits led by worries that packers, despite profitable margins, might consistently bid lower for hogs as supplies and animal weights increase seasonally.

From Monday to Wednesday, packers processed 1.237 million hogs, 19,000 more than a week ago, based on USDA data.

Pork packer margins for Wednesday were a positive $10.05 per head, compared with a positive $7.40 on Tuesday and a positive $3.95 a week ago, according to Colorado-based analytics firm HedgersEdge.com.

Fund selling surfaced after October drifted below the 100-day and 10-day moving averages of 105.85 and 105.32 cents, respectively.

December losses mounted after it dropped beneath its respective 10-day and 100-day moving averages of 95.90 and 95.49 cents.

Live cattle gain

CME live cattle closed higher on short-covering and futures’ discounts to last week’s cash prices, traders said.

October finished 0.825 cent/lb. higher at 157.025 cents, and December at 160 cents, up 1.125 cents.

Last week, cash cattle in the U.S. Plains traded at $161 to $162/cwt, feedlot sources said.

In a trading strategy known as bear spreads, traders sold October futures and bought back months in anticipation of lower cash cattle prices.

Packers may avoid bidding up for cattle given their poor margins, more livestock for sale and sluggish wholesale beef demand, traders said.

The morning’s choice wholesale beef price fell $1.53/cwt from Tuesday to $246.11. Select gained 25 cents to $233.21, USDA said.

Beef packer margins for Wednesday were a negative $55.25 per head, compared with a negative $45 on Tuesday and a positive $10.25 a week ago, as estimated by HedgersEdge.com.

Investors adjusted positions ahead of the government’s monthly Cattle-On-Feed report that will be issued on Friday.

Analysts expect the report to show less cattle entered feedlots last month after sufficient pastures allowed ranchers to fatten animals outside of feedyards longer.

CME feeder cattle futures closed higher, drawing support from live cattle market buying.

September closed 0.7 cent/lb. higher at 230.3 cents, and October was 228.1 cents, up 2.225 cents.

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

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