August 3, 2010

 

CBOT hog futures set more contract highs as pork gains

 

 

CBOT hog futures sped higher on Monday (August 2), with nearby August the highest in three months and several deferred contracts setting more contract highs, in reaction to the higher stock market and lower dollar and to last week's higher pork prices.

 

Meanwhile, the cattle market struggled with nearby months lower at times due to lower cash beef and cattle prices.

 

Investors rushed to buy hog futures after cash pork prices rose to a three-month high last week.

 

A nearly 200-point rise in the Dow Jones industrial average and a lower dollar also encouraged buying. A stronger economy, reflected by the higher stock market is good for meat sales, while the lower dollar can help pork exports.

 

Hog numbers are down this year as producers had reduced herds after two years of losses from high grain prices and slow pork sales. Now the smaller supply has pushed up pork prices, with cash pork bellies reaching a record last week of US$135 per cwt.

 

USDA on Friday (July 30) reported the average wholesale cash pork price at US$89.82 per cwt, up 44 cents from Thursday and the highest since mid-May.

 

That average could top 90 cents this week and then start trending lower, CME traders said. While hog supplies are tight now, they will increase in coming weeks as last spring's baby pigs reach market weight.

 

News last week's that Russia had resumed buying US chicken was considered bullish for pork in that the chicken will not remain in the US, traders said.

 

Also, analysts said it is unlikely the resumption of chicken exports will hurt pork exports because Russia has not been a major pork buyer.

 

Earleir, August hog futures were 0.425 cent at 86.250 cents per lb and October up 0.225 at 79.250 cents; while live cattle futures turned lower after a higher start, pressured by last week's lower cash beef and cattle prices.

 

Wholesale boxed beef prices were lower again on Friday, but still above a year ago. Beef plant margins were negative last week and that may hurt this week's bids for cash cattle. Cash cattle traded US$2 lower US$93 per cwt on Thursday in the southern Plains.

 

August feeder cattle were down 0.750 cent at 112.975 cents per lb and September off 0.500 at 113.700.