October 13, 2010

Hog, cattle futures rise on high feed costs

Hog futures rose as corn costs go to the highest level in two years, which may spur farmers to feed livestock less and slow herd expansion; cattle futures jumped to a one-week high.

Corn, the main ingredient in livestock feed, has surged 16% since October 7, the day before the USDA cut its crop estimate more than analysts expected. Hog prices are up 11% this year.

"The bullish news is the price of grain, the price of feed. They won't feed hogs to as heavy a weight," said Lawrence Kane, a market adviser at Stewart-Peterson Group in Yates City, Illinois.

Hog futures for December settlement rose US$0.015, or 0.2%, to settle at US$0.72775 a pound at 1:05 p.m. on the Chicago Mercantile Exchange. Earlier, the price gained as much as 0.8%.

Cattle futures for December delivery advanced US$0.055, or 0.6%, to settle at US$0.993 a pound. Earlier, the price reached 99.65, the highest level for a most-active contract since October 1. The commodity has gained 15% in 2010.

"Feed costs will eventually turn finish weights lower and lower the supply of beef," Kane said.

Yesterday, wholesale choice-beef prices rose 0.7% to US$1.5293 a pound, the biggest gain since August 20, according to government data. At midday, prices were down 0.2%.

Feeder-cattle futures for November settlement added US$0.0125, or 0.1%, to US$1.0725 a pound, the first gain in seven sessions.