U.S. livestock: CME hogs hit new high, led by discount to cash prices

Chicago | Reuters — Chicago Mercantile Exchange hogs on Tuesday set a new high after recovering some of Monday’s hefty losses, helped by short-covering and futures’ discount to prices for market-ready or cash hogs.

CME’s hog index, a two-day barometer reflecting cash prices, was at a record-high 129.87 cents, which surpassed the previous high of 129.05 for March 27 (all figures US$).

April hogs closed up 1.8 cents per pound at 127.8, after spiking to a new contract high of 128.225 cents in electronic trading. June hogs finished up 0.425 cent at 127.6 cents.

“The cash and product have not topped out and that’s why the April hog’s discount to the index is higher,” said Archer Financial Services broker Dennis Smith.

Tuesday morning’s average price of hogs in the eastern Midwest was steady at $123.81 per hundredweight (cwt), with prices unavailable elsewhere, according to the U.S. Department of Agriculture.

The morning’s wholesale pork price gained 21 cents/cwt from Monday to an all-time high of $132.79, led by the $1.83/cwt jump in ham costs, USDA said.

Packers may cut cash hog bids by Wednesday if demand for hams at wholesale show signs of peaking before Easter holiday advertisements, a trader said.

Futures clawed back from active selling on Monday following last Friday’s bearish U.S. Department of Agriculture quarterly hog report. The data showed a smaller-than-expected drop in the U.S. hog herd as the porcine epidemic diarrhea virus (PEDv), which is deadly to piglets, spread on U.S. farms.

“These guys are acting like they are seriously doubting that USDA report,” said independent livestock futures trader Dan Norcini.

Cattle fall as funds sell

CME live cattle moved lower, weighed by fund liquidation after contracts slid beneath moving average support levels, traders and analysts said.

April live cattle closed down 1.1 cents/lb. to 144.75 cents, below the 10-day moving average of 145.25 and above the 20-day moving average of 144.621 cents.

June ended 1.025 cents lower at 136.475 cents, below the 10-day and 20-day moving averages of 137.203 cents and 136.969 cents.

CME live cattle felt more pressure from uncertainty about prices for slaughter-ready or cash prices this week based on deteriorating packer margins and inconsistent wholesale beef prices.

Last week, cash cattle in Texas and Kansas traded at a record high of $152/cwt, and Nebraska cash cattle hit a $154 record, feedlot sources said.

The early wholesale choice beef price rose 66 cents/cwt from Monday to $234.45. Select cuts gained 79 cents to $225.80, based on USDA data.

HedgersEdge.com calculated the beef packer margins for Tuesday at an estimated negative $76.95 per head, compared with a negative $58.30 on Monday and a negative 35 cents a week ago.

Some April losses were tied to investors exiting that contract before the first notice day for live cattle deliveries on Monday.

Feeder cattle futures fell, pressured by CME live cattle’s selloff and higher corn prices.

April closed 0.575 cent/lb. lower at 176.45 cents, and May ended down 1.075 cents to 176.775 cents.

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

 

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