U.S. livestock: Short-covering sends CME hog futures higher

(CMEGroup.com)

Chicago | Reuters –– Chicago Mercantile Exchange hog futures closed higher on Tuesday, driven by short-covering as some investors prepare for an early start of the Labour Day holiday weekend, traders said.

Speculators bought CME hogs in the belief that the two-week slump in prices for slaughter-ready, or cash, hogs may be about to end.

On Tuesday, packers again lowered cash bids while working through ample supplies of heavyweight hogs.

Some people believe the worst for cash prices is over — for now — but others see more cash pressure ahead.

“We’ll have to wait and see what happens after Labour Day,” said JBS Trading president James Burns.

Tuesday morning’s average price of hogs in Iowa/Minnesota slipped 20 cents per hundredweight (cwt) from Monday to $93.96, according to the U.S. Department of Agriculture (all figures US$).

Meanwhile, last gasp grocery store meat purchases for Labour Day barbecues temporarily propped up wholesale pork values.

USDA data showed the morning wholesale pork price up $1.19/cwt from Monday to $103.87.

Futures received an added boost from their discounts to CME’s hog index at 103.32 cents. Fund buying developed after October and December moved beyond their respective 10-day moving averages of 94.50 and 88.12 cents.

Market volatility should increase in the coming days as investors adjust positions before the holiday, traders said.

October closed 1.65 cents per pound higher at 95.1 cents, and above the 10-day moving average of 94.49 cents. December ended at 89.7 cents, up 1.7 cents, after earlier surpassing its 10-day moving average at 88.11 cents.

Live cattle up again

CME live cattle gained for a fourth session in a row, helped by pre-holiday short-covering, traders said.

August live cattle drew support from its discount to last week’s prices for market-ready, or cash, cattle.

Last week, cash cattle in Kansas and Nebraska fetched mostly $153-$155/cwt, feedlot sources said.

Market bulls are looking for cash cattle prices on par with last week based on last Friday’s strong cash returns compared to earlier in the week.

Overall cattle numbers remain tight and packers continue to sell beef despite historically high prices, said Jack Salzsieder, an analyst at K+S Financials.

Bearish traders said more cattle available for sale, and packers buying for the holiday-shortened workweek, will weigh on cash prices.

August live cattle ended up 0.8 cent/lb. at 153.55, and October at 148.25, up 0.1 cent.

CME feeder cattle settled higher, lifted by live cattle market advances and weak corn prices.

August, which will expire on Thursday, closed up 0.125 cent/lb. at 217.525 cents, and September up 0.925 at 214.2 cents.

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

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