U.S. livestock: Fund buying sends CME hogs mostly higher

Chicago | Reuters — Most Chicago Mercantile Exchange hog contracts gained ground on Monday with help from fund buying and anticipation of reduced production in the weeks ahead, traders and analysts said.

Some packing plants plan to be dark during the Easter holiday weekend, limiting their need for hogs.

Processors have already cut operations as the porcine epidemic diarrhea virus crimp hog supplies, with the most severe impact expected this summer.

Slaughter cutbacks could pressure cash prices, boost wholesale pork values and improve packer profit margins, traders said.

On Monday, packers processed an estimated 377,000 head of hogs, down 27,000 from last week and 35,000 fewer than a year ago, according to U.S. Department of Agriculture data.

Separate USDA data showed the afternoon’s average price of hogs in the Iowa/Minnesota market up 66 cents per hundredweight (cwt) from Friday to $119.03, but down $1.81 in the eastern Midwest to $117.36 (all figures US$).

Monday afternoon’s wholesale pork price slipped 35 cents/cwt from Friday to $124.41, USDA said.

HedgersEdge.com calculated pork packer margins for Monday at a positive $2.65 per head, compared with a negative 90 cents per head on Thursday and a positive $1.70 a week ago.

Investors sold April futures, which expired at noon CT, and simultaneously bought back months in part because of their discounts to the exchange’s hog index at 126.75 cents.

April hogs settled down 0.125 cent per pound to 124.8 cents. May, the new lead month, ended up 1.075 cents to 121.675 cents.

Most actively traded June ended 1.425 cents higher at 122.65 cents, and above the 10-day moving average of 122.39 cents.

Live cattle up again

CME live cattle rose for a fifth straight session, driven by their discounts to Friday’s cash or slaughter-ready cattle prices, traders said.

Last Friday, cattle in Texas and Kansas moved at $147/cwt, and mostly $150 in Nebraska, feedlot sources said.

April live cattle closed up 0.5 cents/lb. at 145.35 cents, and June ended up 0.125 cent at 135.9 cents.

Despite their poor margins, packers may spend steady money for cattle for delivery during the first full week of production after the Easter holiday, a trader said.

And beef demand at wholesale could pick up soon as supermarkets gear up for post-Easter holiday beef advertisements, he said.

The afternoon’s wholesale choice beef price was up 40 cents/cwt from Friday at $222.52. Select cuts dropped 41 cents to $212.05, based on USDA data.

Beef packer margins for Monday were an estimated negative $139.90 per head, compared with a negative $122.85 on Friday and a negative $120.20 a week ago, as calculated by Colorado-based analytics firm HedgersEdge.com.

Firm front-month CME live cattle, and the jump in the exchange’s feeder cattle in index from 178.3 cents to 180.39, lifted futures to a new high for a second day in a row.

April closed 0.5 cent/lb. higher at 180 cents, and hit a new contract high of 180.2 cents. May finished up 0.35 cent to 180.425 cents.

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

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