U.S. livestock: Fund buying rallies CME hog futures

Chicago | Reuters — Chicago Mercantile Exchange hog futures closed higher on Wednesday, supported by short-covering and fund buying, traders said.

Speculation about tight supplies ahead pegged to the porcine epidemic diarrhea virus (PEDv) provided further support to futures that ignored Wednesday’s drop in market-ready hog and wholesale pork prices.

The morning’s average hog price in the Iowa/Minnesota market fell $2.01 per hundredweight (cwt) from Tuesday to $109.20, according to the U.S. Department of Agriculture (all figures US$).

Separate USDA data showed wholesale pork values slid $1.10/cwt from Tuesday to $115.61.

Futures may be looking beyond current negative market factors and ahead to a tight hog supply situation later, said K+S Financials analyst Jack Salzsieder.

On Wednesday, Tyson Foods told Reuters the company is buying heavier hogs and plans to scale back production this summer as it copes with PEDv-reduced hog supplies.

Tyson’s remarks had no tangible impact on the market because investors have known for some time that packers are using bigger hogs and cutting kills to offset PEDv, a trader said.

Dan Norcini, an independent hog futures trader, said: “The Tyson thing will be used by bulls to talk up expected hog shortages. They are not paying attention to heavy-weight hogs.”

Thursday could usher in a volatile session as some investors even up positions before an early start to their U.S. Memorial Day holiday.

Traders will eye USDA’s evening cash hog and wholesale pork data to confirm the morning pullback in prices for both markets.

June hogs ended 1.325 cents per pound higher at 119.925, and July up 1.65 cents at 126.825.

Cash woes drop live cattle

CME live cattle closed lower in anticipation of steady to weak prices for slaughter-ready or cash cattle this week, traders said.

Packers will need fewer animals as they curtail operations to counter tight supplies and will close plants during Monday’s holiday.

A seasonal surge in supplies could keep a lid on cash returns.

Last week, cash cattle in Texas and Kansas, on average, moved at $145/cwt, and $148 in Nebraska.

Improved wholesale beef prices, helped by reduced slaughters and increased retail demand for grilling, minimized futures losses.

June closed 0.475 cent/lb. lower at 138.275 cents, and August 0.5 cent lower at 139.6.

CME feeder cattle hit a new high, supported by firm deep-deferred month live cattle futures.

Traders simultaneously sold May futures, which will expire on Thursday, and bought the August contract in a trading strategy known as spreading.

May closed up 0.15 cent/lb. at 189.2 cents, and August 0.6 cent higher at 196.525 cents.

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

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