March 20, 2010

 

US hog futures slips on signs of slower meatpacker demand

 

 

Hog futures fell for the third time this week on speculation that meatpacker demand in the US is shrinking as wholesale-pork prices slump.

 

Wholesale pork sank 2.7% to 72.68 cents a pound, a three-week low, USDA data show. Hogs for immediate delivery to slaughterhouses dropped 6.4% since March 8 to 68.23 cents a pound earlier. Retailers already may have filled pork orders before the April 4 Easter holiday, when hams are a traditional meal in the US.

 

Hog futures for June settlement declined 0.35 cent, or 0.4%, to 82.575 cents a pound on the Chicago Mercantile Exchange (CME). The most-active contract was up 2.2% for the week, the sixth straight increase and the longest rally in more than a decade.

 

Futures fell even after China, once the second-largest buyer of US pork, said it would resume imports after banning the meat following the outbreak of swine flu last year. "Pork trade will resume immediately, once both sides finalise the export documentation," the USDA said.

 

Increasing pork exports are already priced in to the futures markets, as the June, July and August contracts are trading at about a 10-cent premium to the CME's Lean Hogs Index, a gauge of prices of animals for immediate delivery to slaughterhouses, analysts said.

 

China said last October that it would remove the bans on US meat, and since then the two countries have been negotiating how to implement the agreement, the USDA said.

 

Meanwhile, cattle futures for June delivery dropped 0.05 cent to 95.125 cents a pound, after rallying the previous six sessions. The price was up 2.5% for the week. Earlier, the most- active contract touched 96.3 cents, the highest level since October 2008.

 

Feeder-cattle futures for May settlement rose 0.85 cent, or 0.8%, to US$1.10375 a pound. The price earlier touched US$1.1135, the highest level for a most-active contract since September 2008.

 

Wholesale choice beef climbed for a sixth straight session at midday to US$1.561 a pound, the highest price since November 2008, according to the USDA.

 

Cattle futures earlier rose as much as 1.2% as winter storms today in the Great Plains threatened to curb livestock weights. US feedlots sold 2.1% more cattle to meatpackers in February than in the same month last year, according to a USDA report released after markets closed in Chicago.

 

Feedlots bought 1.665 million young cattle during the month, 0.8% less than a year earlier, and the overall feedlot herd on March 1 totaled 10.864 million cattle, the USDA said.