Chicago | Reuters — Chicago Mercantile Exchange hog futures on Thursday jumped to their three-cents daily price limit, ignited by record-high prices for slaughter-ready or cash hogs, traders and analysts said.
The morning’s hog price at the closely watched Iowa/Minnesota market surged $4.70 per hundredweight (cwt) from Wednesday to a record-high $131.49, according to the U.S. Department of Agriculture (all figures US$).
Fund buying in April futures developed after that contract punched through the 10-day moving average of 123.31 cents.
Short-covering contributed to CME hogs’ limit-up move on Thursday that offset Tuesday’s limit losses.
Traders and analysts pegged recent market volatility to positioning before USDA’s highly-anticipated quarterly hog report on Friday.
Analysts’ estimates for USDA’s Friday’s report varied widely reflecting uncertainty about how much the data will account for the impact of the porcine epidemic diarrhea virus (PEDv) on U.S. farms in recent months.
“You have to be very nimble, very fast on the trigger and that is where all this volatility is coming from. No one is sure of anything,” said Dan Norcini, an independent livestock futures trader.
April and June hogs finished three cents per pound higher at 125.475 cents and 129.3 cents, respectively.
More live cattle gains
CME live cattle gained for a fourth straight session, fueled by this week’s rally in cash or market-ready cattle prices to all-time highs.
Futures’ discount to cash prices encouraged buyers who were also swayed by hog futures’ limit-up settlement.
“You have a discount structure in the futures being led by the cash market. The run up in the hog market made the very expensive beef market less expensive,” said U.S. Commodities analyst Don Roose.
This week, cash cattle in Texas and Kansas traded at a record-high of $152 per cwt, and Nebraska cash cattle hit a $154 record, feedlot sources said.
Periodic beef price weakness and higher costs for cattle wore down packer margins.
HedgersEdge.com calculated the beef packer margins for Thursday at an estimated negative $4.85 per head, compared with a positive 75 cents on Wednesday and a positive $24.15 a week ago.
The early wholesale choice beef price dropped 96 cents/cwt from Wednesday to $240.80. Select cuts slipped 27 cents to $233.04, based on USDA data.
April live cattle closed up 0.675 cent/lb. to 146.475 cents, and June ended 0.9 cent higher at 138.525 cents.
CME live cattle advances, and this week’s higher prices for feeder cattle in local markets, drove feeder cattle futures to a record high for a sixth session in a row.
March, which expired today at noon CT, settled 0.6 cent/lb. higher at 178.55 cents, and hit a new contract high of 178.625 cents in electronic trading.
April, the new lead month, closed up 0.875 cent to 179.5 cents, after posting a fresh contract high of 179.85 cents. May ended 0.75 cent higher at 179.875 cents, after marking a new contract high of 180.275 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.