September 15, 2010

 

CME hog futures end on new highs amid higher prices

 

 

Higher pork prices and fund buying catapulted most CME hogs futures to new contract highs Tuesday (Sep 14).

 

Live cattle at the CME also closed well into bullish trading territory while pit-traded feeder cattle finished weak.

 

Monday's US$1.42-per-hundredweight wholesale pork price boosted CME hogs at the start Tuesday. Hog futures traders were also inspired by what appeared to be additional retail pork buying interest Tuesday.

 

Year-to-date hog slaughters through last week were down 4.4% compared with a year ago. Hog farmers began whittling down herds in 2008 due to high corn prices. The industry was later slammed by the recession and AH1N1 flu outbreak, or what was referred to as "swine flu," which had curbed pork demand.

 

Spot October and nearby December hog contracts gained added traction after both months surpassed recent highs. Fund buying surfaced after December and remaining trading months registered new contract highs.

 

Meanwhile, the dollar's tumble and CBOT corn's surge inspired far-month bullish CME hog futures traders. The lower dollar usually loosens up US exports in general. And high corn prices are positive for cash hog values moving forward because it may deter hog farmers from expanding their herds.

 

Spot October hogs ended at 78.70 cents a pound, up 2.40 cents, or 3.1%. Nearby December ended up 2.10 cents, or 2.8%, at 76.40 cents and hit a 76.55-cents new contract high. And February closed 1.75 cents higher, or 2.3%, at 79.32 cents and peaked at a 79.35-cent fresh seasonal top.

 

On the other hand, CME live cattle futures posted back-to-back market gains on optimistic cash cattle price expectations and supportive outside markets.

 

After opening mixed Tuesday, CME live cattle contracts slipped on profit taking. Those in CME's live cattle pit also took their cues from the stock market, which spiked at first and then later slipped below breakeven.

 

CME hogs' sprint to new contract highs also stimulated buying in the exchange's live cattle arena. Although pork and beef are competing meats, whenever lean hogs or live cattle futures break or rally sharply, the other usually responds in kind.

 

CBOT corn's upswing stirred far-month CME live cattle futures buying interest. Cattlemen may resist expanding their herds if faced with higher feed costs, which could ultimately underpin cash cattle values.

 

Spot October live cattle ended up 0.75 cent a pound, or 0.8%, at 98.20 cents. Nearby December finished up 0.42 cent, or 0.4%, at 100.80 cents.

 

Pit-traded feeder cattle ended weak on profit taking and CBOT corn's upswing. Costly corn is negative for feeder cattle futures because it implies higher feed costs for cattle feeders.

 

Spot September feeder cattle closed down 0.20 cent, or 0.2%, at 112.15 cents. Most-actively traded October finished down 0.27 cent, or 0.2%, at 112.10 cents.