U.S. livestock: CME hog futures gain, but slip from record high

Chicago | Reuters — Chicago Mercantile Exchange hog futures closed higher in pit trading on Tuesday but eased from their all-time high as investors took profits while awaiting cash price direction, traders said.

In electronic trading, CME April hogs edged upward after the average cost of hogs in the closely-watched Iowa/Minnesota market came in at a record-high $121.13 per hundredweight (cwt), topping, Monday’s $119.15 record, according to the U.S. Department of Agriculture (all figures US$).

Futures received an added boost from the day’s record-high wholesale pork price of $130.36/cwt that bested Monday’s $126.88 record, based on USDA data.

Government monthly retail price data on Tuesday showed pork last month at $3.73 per pound, compared with $3.76 in January and $3.49 a year ago.

The porcine epidemic diarrhea virus (PEDv), which is typically fatal to young piglets and is sweeping through U.S. hog farms, reduced the number of market-ready hogs, forcing packers to actively compete for supplies, said traders and analysts.

Intentional cutbacks in plant operations, and weather-delayed hog deliveries in the north-central Midwest, slowed the flow of pork to retailers which pushed up wholesale prices.

Processors and end-users are putting more pork into the nation’s freezers to get ahead of a potential PEDv-related supply shortfall during the summer grilling period.

On Monday and Tuesday packers processed an estimated 809,000 hogs, down 12,000 from last week and 46,000 fewer than a year earlier, according to USDA.

April closed 1.525 cents/lb. higher at 123.225 cents, and peaked at a contract high of 124.225 cents in electronic trading. June finished up 2.225 cents at 133 cents, and posted a fresh contract high of 133.425 cents.

Cattle rise with beef prices

CME live cattle moved moderately higher, supported by Tuesday’s upturn in wholesale beef prices, traders said.

The day’s strong wholesale beef cutout, fewer cattle up for sale and profitable packer margins bode well for cash prices this week, traders and analysts said.

They said packers are attempting to conserve margins and curb cash spending by cutting slaughter rates.

The afternoon’s wholesale choice beef price, or cutout, rose $1.21/cwt from Monday to a record-high $244.06 in light sales volume. Select cuts were up $1.13 to $237.19, based on USDA data.

Tuesday’s USDA retail price data showed beef in February hit a record $5.58/lb., eclipsing the previous record of $5.41 in November 2013.

Last week, cash cattle in Texas and Kansas fetched $148/cwt, and upwards of $152 in Nebraska, feedlot sources said.

Beef packer margins for Tuesday were estimated at a positive $23.45 per head, compared with a positive $18.15 on Monday and a negative 90 cents a week ago, as calculated by HedgersEdge.com.

April live cattle closed 0.675 cent/lb. higher at 145.7 cents, and June ended at 138.35 cents, up 0.375 cent.

Profit-taking and higher corn prices undercut CME feeder cattle futures.

March ended down 0.625 cent/lb. at 174.125 cents, and April closed 1.075 cents lower at 176.9 cents.

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

 

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