CME traders belly up to hog market amid shunning cattle

 

 

Futures traders bellied up to the hog market as March got underway, sensing that shrinking supplies will send prices higher.

 

Traders are also turning noses up at cattle after a sharp beef price upswing in February.

 

CME Group lean hog futures for April delivery today rose 0.15 cent to 72.95 cents a pound, the contract's highest closing price since January 20. April live cattle futures fell 0.2 cent to 91.725 cents per pound, a two-week low.

 

The recent price action partly reflects government reports last week that indicated contraction in the nation's pork inventory is expected to continue into 2010, said Bob Short, senior livestock analyst with broker PFGBest in Chicago. Additionally, a runup in beef prices last month is probably going to crimp demand, Short said.

 

US frozen pork inventories at the end of January totalled 495.6 million pounds, down 18% from a year earlier and the lowest in three years, the USDA said in its monthly report.

 

In its monthly Livestock Slaughter report February 26, the USDA said the nation's pork production fell 1.7% in January compared with the same month a year earlier, to 2.083 billion pounds. First-quarter pork production is expected to decline 3.1%, the USDA said in a separate report last week.

 

Live cattle futures may continue to lose ground to lean hogs for the next five to 10 days, Short said. As a result, the price difference between April cattle and April hogs, currently about 19 cents, may narrow as much as 2 cents, he said.

 

But meat buyers are starting to balk after price surge in both beef and pork last month, Short said.

 

Pork cutout values averaged 83.51 cents a pound last week, up 6.4% over the past three weeks. Bone-in hams averaged 68.55 cents a pound last week, up almost 5 cents, or 7.7%, from the end of January.

 

Meanwhile, the outcome of a trade dispute between the US and Russia over poultry imports is also key to the direction of both the cattle and hog markets, Short said.

 

Russia suspended poultry imports from the US at the beginning of the year, citing concern over a chlorine wash. A prolonged dispute that leads to increased chicken supplies may eventually weigh on pork and beef prices, he said.