August 10, 2010

US hog futures set two-month low in choppy trade

US hog futures posted a two-month low in benchmark October early on Monday (Aug 9) as weak technical and lower trending cash hog and pork markets continued to weigh on the futures market.

Investors continue to exit hog futures as cash markets slip, with the average cash pork price setting a one-week low on Friday, after reaching its highest level since mid-May earlier last week.

The USDA's average cash pork price on Friday was down 58 cents at US$90.05 per cwt, a one-week low. The pork price earlier last week was at its highest level since mid-May.

US cash hogs traded US$1 lower on Monday in Midwest markets as the market continued its bearish trend, with most packers full for the week, dealers said.

October's open interest after Friday was 97,938 contracts, down 3,475 from Thursday, with much of the open interest being held by funds.

Soon-to-expire spot August posted a 2-1/2-week low, while benchmark October slipped to a two-month low. Deferred months also slipped to more than two-week lows.

At 11:20 a.m. CDT (1620 GMT) August hogs were down 0.400 cent at 81.625 cents per lb and October was down 0.275 at 73.800 cents.

Despite weakness in hog futures, pork belly futures continued their climb to contract highs, with the August pork belly contract bid up the 4.500-cent expanded limit at 127.500 cents per lb. August open interest was down to 16 contracts at the beginning of Monday's trade.

Meanwhile, cattle futures traded uneven at the start but moved higher following a higher stock market and recent fund buying that has lifted open interest in October and other back months.

However, cattle futures moved higher on support generated by an upturn in the stock market. Also, a better economy would likely increase demand for beef.

The wholesale choice boxed beef price shot up US$1.95 per lb early on Monday to US$152.74, a 1-1/2-week high. August live cattle were up 0.500 cent at 93.275 cents per lb and October was up 0.250 at 95.750.

Feeder cattle were lower in light trading, with nearbys posting a 6-1/2-week low amid concern recent rising grain prices would limit demand. August feeders were down 0.200 cent at 112.200 cents per lb and September was down 0.275 at 111.975.