CME hog futures slips 2% as equities flounder

 

 

Floor-traded CME lean hogs Monday (May 17) echoed Friday's 2% retreat at the hands of fund selling and persistent outside market negativity.

 

June and July CME hogs tumbled to eight-week lows, sank 2% amid worries over the European debt crisis that again gave the dollar wings.

 

Consumers would be less likely to buy high-end pork cuts with one eye on their purse strings and the other on a wobbly global financial situation. Plus, a stronger dollar usually drives up the cost of US export goods, including pork.

 

Early-week market uncertainty and follow-through from Friday's lean hogs declines tugged at futures from the start. Lean hogs also faltered despite Monday's generally steady-to-firm cash hog returns, Friday's wholesale pork rebound and futures' bullish price discounts to CME's lean hog index.

 

However, there was talk that cash and wholesale pork prices may come under pressure soon when retailers reduce their need for fresh pork as they pad on-hand inventories before the Memorial Day holiday.

 

Spot-June ended 2.05 cents lower, or 2.5%, at 81.50 cents a pound. Nearby-July finished 2.22 cents lower, or 2.6%, at 81.60 cents.

 

CME July pork bellies finished 2.85-cents lower, or 2.8%, at 98.55 cents due to extremely low volume and lean hogs' selloff. Other belly months were unquoted.

 

Meanwhile, live cattle at the CME settled lower due to selling pressure in the adjacent lean hog pit and equities that stewed in bearish territory heated by concerns about Europe's financial viability.

 

CME live cattle chopped around at first after residual selling from futures' sheer drop Friday encountered short-covering.  And while June and August price discounts to recent cash sales attracted market bulls, others were discouraged by cash-basis cattle in Kansas and Oklahoma that sold for US$98 per hundredweight. The bulk of fed cattle last week brought US$100.

 

Packers were expected to rein in cash spending due to dwindling profit margins and diminished wholesale beef buying interest as retailers resist paying for product at current prices.

 

The USDA's Monday afternoon boxed beef price data, which reflects wholesale beef values, showed choice cuts up US$0.11 per hundredweight, but select items slid an extra US$0.48.

 

Spot-June live cattle closed 0.75 cent lower, or 0.8%, at 92.50 cents a pound and earlier slid to a seven-week low. Nearby-August finished 0.80 cent lower, or 0.9%, at 91.20 cents. The contract at one point drifted to a 6 1/2 week bottom.

 

CME feeder cattle also finished lower in response to live cattle's setback. May and August feeders also touched off sell orders after both months fell below Friday's lows.

 

Spot-May closed down 0.57 cent, or 0.5%, at 109.65 cents. Most-actively traded August finished 0.92 cents lower, or 0.8%, at 112.05 cents.