U.S. livestock: CME lean hogs surge amid summer grilling questions

(National Pork Board (U.S.) photo via ARS/USDA)

Chicago | Reuters — Chicago Mercantile Exchange lean hog futures for animals set to be delivered in July and August surged to all-new contract highs on Wednesday, as investors bet on tighter supplies being available for the summer grilling season.

Demand from pork packers was a bit hit and miss, said one cash hog dealer in Iowa, who noted that current supplies are ample to meet the near-term demand from retailers.

But traders are eyeing possible trouble down the road.

Data from the U.S. Department of Agriculture about hog breeding intentions has forecasted that hog producers could have at least two per cent fewer animals ready to be slaughtered for meat by this summer, when pork demand typically is strong.

The weight of hogs going to market now is lessening: Average hog weights declined to 282.9 lbs. in Iowa and southern Minnesota, down from 284.7 lbs. a week ago and 284.2 lbs. a year ago, the U.S. Department of Agriculture said in a weekly report.

And government data showed that some cuts consumers use for barbecuing — including ribs, belly and pork butt — saw prices rising on Wednesday to the highest levels in weeks.

That, said traders, sent July and August lean hog futures soaring, with July closing up 0.8 cents at 81.8 cents/lb. and August up 0.55 cents at 80.95 cents/lb.

“If the number of hogs is starting to tighten up, and you’re getting lower weights on the animals now, it tells you these producers’ supplies are current and they don’t have a back-log of hogs,” said independent livestock futures trader Dan Norcini. “Traders are making the assumption that your pork production is going to start declining going forward.”

April lean hogs contracts closed up 2.325 cents/lb. lower at 72.1 cents, while May ended up 1.075 cents higher at 78.95 cents and June finished the day up 1.05 cents at 82.55.

Cattle futures holding pattern

Live and fed cattle contracts remained relatively stable on Wednesday, as traders kept a close eye on whether cash bids might continue to rise this week and waited to see what beef demand might be after Easter, said Livestock Marketing Information Center agricultural economist Jessica Sampson.

April live cattle closed down 0.35 cent/lb. at 136.775 cents. June live cattle ended down 0.375 cent/lb. to 126.3 cents.

March feeder cattle closed up 0.075 cent/lb. to 159.05 cents.

P.J. Huffstutter reports on agriculture and ag commodities for Reuters from Chicago. Additional reporting by Michael Hirtzer in Chicago.

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