August 18, 2010

 

CME hog futures end higher on solid market fundamentals

 

 

CME hogs settled higher Tuesday (Aug 17) on stout market fundamentals that trumped potentially negative market news that Mexico intends to impose a 5% tariff on US pork.

 

Mexico's economy minister said Monday the country will expand its original list of 89 US goods that will be assessed an import duty to 99, including a 5% tariff on pork.

 

Mexico is the top-ranked market by volume for US pork and pork variety meats, according to US Meat Export Federation (USMEF). For the first six months of this year, Mexico took in 594 million pounds of pork from the US worth US$482.5 million, compared with 548 million pounds valued at US$369.7 million during the same period in 2009, she said.

 

For 2009, the US exported 1.11 billion pounds of pork and pork variety meat to Mexico valued at US$762.3 million, said USMEF.

 

Electronically-traded CME hogs were first to respond to the news, which weakened futures in overnight trading. However, by the time the 10:05 a.m. EDT, hog contracts sprang to life with the help of wholesale pork prices that late Monday jumped US$1.23 per hundredweight.

 

Retail meat buyers clamoured for fresh pork to accommodate an anticipated increase in grilling demand from grocery shoppers as they prepare for the approaching Labour Day holiday. Also, packers for the most part paid steady-to-higher money for supplies to keep pace with the recent surge in fresh pork sales.

 

October and December also benefited from fund buying after both months cleared their respective technical resistance hurdles.

 

Spot October settled at 75.52 cents a pound, up 0.67 cent or 0.9%. The contract earlier rolled through 75.23-cent 100-day, 75.31-cent 10-day and 75.81-cent 40-day moving average resistance obstacles.

 

Nearby December ended 0.77 cent higher, or 1.1%, at 73.82 cents. December took out its 73.16-cent 40-day, 73.34-cent 10-day and later 73.79-cent 20-day moving average resistance barriers.

 

CME pork bellies were unquoted. The exchange's weekly belly storage data will be released after 5 p.m. EDT Tuesday.

 

Meanwhile, live cattle at the CME finished mostly weak on spreading out of deferred contracts into August. Also, profit-taking dragged on several months as traders waited for this week's cash cattle sales to get underway.

 

Spreads involve trading two or more contracts at the same time with the intent to capitalise on the price differences between them.

 

Cattle months firmed at first on follow-through buying after most months Monday sprinted to new contract highs. Also, wholesale beef value's solid performance ahead of the Labour Day holiday bolstered floor confidence about this week's cash chances.

 

Packers came out bidding US$93 per hundredweight for cash-basis supplies against US$97 asking prices from sellers. Cash cattle last week moved at US$93-95.

 

Tuesday afternoon's USDA beef data, which reflects wholesale beef prices, showed choice cuts rose another US$1.03 per hundredweight and select items gained an extra US$1.07.

 

Spot August ended up 0.50 cent a pound, or 0.5%, at 95.62 cents. Most actively traded October finished down 0.22 cent, or 0.2%, at 95.95 cents, and December finished down 0.02 cent, or 0.02%, at 98.20 cents.

 

Pit-traded CME feeder cattle settled firm on fund buying and buy stops after August and October rolled through chart resistance barriers.

 

Spot August closed up 0.55 cent, or 0.5%, at 113.25 cents. August earlier overcame its 113.07-cent 100-day and 113.24-cent 40-day moving average resistance obstacles.

 

Most-actively traded September finished at 113.37 cents, up 0.40 cent or 0.4%. September initially surpassed its 112.99-cent 100-day, 113.32-cent 40-day and 113.79-cent 20-day moving average resistance impediments.