U.S. livestock: CME hog futures hit six-year low as supply woes persist

(Regis Lefebure photo courtesy ARS/USDA)

Chicago | Reuters — Chicago Mercantile Exchange lean hogs sagged to a six-year low Thursday, pressured by continued worries over plentiful supplies that sank futures to a five-year bottom on Wednesday, traders said.

February closed 1.825 cents per pound lower at 63.275 cents, and set a new contract low of 62.85 cents in electronic trading (all figures US$). April ended down 1.85 cents, to 66.275 cents, and posted a fresh contract low of 66.15 cents.

The backlog of pork was a concern because of the ongoing West Coast labour dispute at a time when hog farmers are rushing animals to market to make way for their next batch of pigs, said Allendale Inc. chief strategist Rich Nelson.

Burdensome supplies dropped the afternoon’s average price for market-ready or cash hogs in Iowa/Minnesota by $1.24 per hundredweight (cwt) from Wednesday to $62.19, said the U.S. Department of Agriculture.

Thursday afternoon’s wholesale pork price was at $73.97/cwt, down 71 cents from Wednesday, according to USDA, as packers discounted prices to clear pent up inventory, a trader said.

Investors sold deferred months in the belief that vaccines, enhanced biosecurity measures and heavyweight hogs offset the impact of the deadly Porcine Epidemic Diarrhea virus on U.S. farms.

Live cattle end mixed

CME live cattle contracts closed mixed as cash price optimism stirred bull spread that consisted of investors who bought the February contact and sold back months, traders said.

February closed up 0.425 cent/lb. at 153.425 cents, and April ended down 0.625 cent at 148.025 cents.

Market participants expect cash cattle to trade steady or better than last week based current bids of $160/cwt and Wednesday’s sales in Texas and Kansas at that price. Sellers are holding for at least $162.

Last week, cash cattle fetched mostly $159-$160/cwt.

Bullish traders are banking that the seasonal decline in supplies will underpin cash prices, despite unprofitable packer margins and languid wholesale beef demand.

The afternoon’s choice wholesale beef price sagged $1.57/cwt from Wednesday to $241.18. Select slipped 19 cents to $235.39, USDA said.

Sell stops and fund liquidation pressured CME feeder cattle futures.

March closed 1.075 cents/lb. lower at 195.65 cents, and April down one cent, to 195.85 cents.

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

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