June 30, 2011

 

US hog futures end higher

 

 

US hog futures ended higher on Wednesday (Jun 29) recouping more of what they lost last week as investors conveyed that Tuesday's (Jun 28) lower pork prices started cash sales.

 

Cattle futures failed to follow hogs' lead and closed lower in nearby months at the Chicago Mercantile Exchange on worries beef sales will slow and prices fall once the holiday business is done.

 

In hogs, the discount of futures to cash plus the higher stock market and crude oil induced some of Wednesday's gains. Also, opinions have shifted regarding cash hog prices, with traders now predicting higher cash markets next week.

 

"The drop in the product (pork) may have stimulated demand and they (pork plants) will pay up for hogs next week. That is the thought," said a trader.

 

The average cash pork price dropped US$3.37 per cwt in Tuesday's USDA pork report to US$97.37. Monday (Jun 27) price of US$100.74 was a record high.

 

Chicago traders said that tumble in cash pork now has end users, such as supermarkets and restaurants buying again.

 

Cash hogs traded lower in Midwest markets early on Wednesday and should be lower on Thursday (Jun 30), but higher after next week's holiday.

 

News on Wednesday of an undercover investigation showing abuse of baby pigs at an Iowa farm was noted but did not affect price action, traders said.

 

On Wednesday, CME July hogs 2LHN1 closed up 0.850 cent at 95.225 cents per lb, August 2LHQ1 up 0.825 cent at 93.175, and October 2LHV1 up 0.900 cent at 87.700.

 

Cattle finished lower in nearby months as traders expect light cash cattle sales this week at steady to lower prices.

 

Also, beef sales should slow after Monday's holiday. The hot summer weather that follows often has consumers shifting to lighter fare like lunch meats, fruits and vegetables.

 

Cash cattle traded at US$112 per cwt last week, while this week's business may be at US$111-112. Bids of US$109 were passed on Wednesday morning and Chicago traders said it may be Thursday before cash trades.

 

June and August cattle futures remain in narrow trading ranges that go back to last week.

 

The June contract expires at midday on Thursday, which will put August in the lead. August has been pressured at times by funds buying October and selling August to move longs to the deferred month. Such action will increase next week as more funds participate.

 

CME June cattle 2LCM1 closed down 0.625 cent at 111.725 cents per lb and volume-leader August 2LCQ1 down 0.175 cent at 111.575.

 

Feeder cattle finished lower, pushed down by lower live cattle futures and by the double-digit gains in corn futures early on Wednesday. Corn prices later eased from those highs.

 

The latest CME feeder cattle index, which is a measure of cash prices, was up 0.23 cent at 133.23. The previous index jumped 3.01 cents. Feeders at the important Oklahoma City market traded up US$1 to US$3 per cwt on Monday.

 

August feeders 2FCQ1 closed down 0.100 cent at 137.775 cents per lb and September 2FCU1 down 0.100 at 138.575.