Chicago | Reuters — Chicago Mercantile Exchange lean hogs closed higher Tuesday, supported by short-covering and speculative buying after recent market losses, traders said.
December finished 1.15 cents per pound higher at 90.2 cents, and February was up 1.075 cents at 89.3 cents (all figures US$).
Fund buying surfaced after the December contract broke through the 10-day moving average of 89.83 cents. Back months moved beyond Monday’s highs, which triggered buy stops.
Futures gained despite deteriorating market-ready or cash hog prices and the morning’s wholesale pork cutout value relapse.
Tuesday morning’s average hog price in Iowa/Minnesota dropped $1.96 per hundredweight (cwt) from Monday to $86.49, the U.S. Department of Agriculture said.
Separate USDA data showed the morning’s wholesale pork price, or cutout, slumped $2.61/cwt from Monday to $97.50, after packers cut ham and loin costs.
Seasonally abundant supplies pulled down cash prices and increased the availability of pork to retailers.
“It should be interesting to see how investors respond to this afternoon’s USDA cash and wholesale pork prices during the new shorter screen trading session,” another trader said.
Monday was the first full day that the CME implemented reduced Globex livestock market trading hours.
Weak live cattle futures
CME live cattle closed weaker on profit-taking and October selling ahead of its expiration on Friday, traders said.
October closed 0.35 cent/lb. lower at 169.2 cents. December, the next lead month after October expires, was down 0.05 cent at 167.775 cents.
In a trading strategy known as bull spreads, traders simultaneously sold back months and bought December futures in anticipation of steady or better cash prices this week.
Even though more animals are available now, packers are thought to need cattle after buying fewer of them at a record-high $170/cwt last week.
Last week’s record cash prices convinced ranchers and feedlots to pull cattle off pastures and put them up for sale, a trader said.
Processors charged grocers more for beef to shore up their sagging margins and offset the high cost for cattle.
Grocers may be booking small amounts of steaks and roasts to compete with hams and turkeys during the fall and winter periods, another trader said.
Tuesday morning’s choice wholesale beef price rose $2.40/cwt from Monday to $251.60. Select surged $3.21 to $239.20, the USDA said.
CME feeder cattle futures sagged on profit-taking, back-month live cattle market selling and steady to $2/cwt lower prices for feeder cattle in local markets.
October, which will expire on Thursday, closed down 0.05 cent/lb. at 238.275 cents. November, the soon-to-be lead month, ended 1.15 cents/lb. lower at 233.650 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.