January 10, 2011

Increasing US pork supplies result in falling Hog prices in Chicago

Hog futures fell on indications of growing US pork supplies amid slumping demand, while cattle waned for the first weekly drop in a month.

Hog carcasses averaged 209.66 pounds on January 5, up 3.3% in the past year, USDA data showed. On November 26, the average weight was 209.88 pounds, the heaviest since at least 2002. US pork exports have declined from year-earlier levels for four straight months, the USDA said.

"We've got poor exports, and there's fear that weights are going to stay high," said Paul Beere, a market adviser at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin.

Hog futures for February settlement fell 0.675 cents, or 0.8%, to 79.1 cents a pound on the Chicago Mercantile Exchange. A close at that price would leave the commodity down 0.8% this week, the first such decline since mid-December.

Wholesale-pork prices, known as the cutout, rose 0.2% to 78.14 cents a pound yesterday, while Chicago futures surged as much as 2.7%.

"You would expect with that kind of a reaction in the market yesterday, we'd have pork values higher," Beere said. "That's probably what's got the market more concerned today. They're looking to see what the cutout did, and it didn't surge like it should have with that kind of futures-market rally."

Cattle futures for February delivery declined 0.5 cent, or 0.5%, to US$1.06225 a pound on the CME. A close at that level would leave prices down 2% this week, the first slide since December 10.

Feeder-cattle futures for March settlement dropped 0.55 cent, or 0.4%, to US$1.22525 a pound.