October 19, 2010

 

US hog futures plunge to seven-month low on higher sales

US hog futures dipped to a seven-month low in the December contract early Monday (Oct 18) as more losses in the cash hog and pork markets fueled selling, traders said.

 

Expectations that cash cattle could trade higher again this week supported live cattle early, but profit taking later pared gains.

 

Hog futures are trending lower seasonally, along with the cash markets, as hog supplies and the pace of hog slaughter usually increase in the fourth quarter of the year.

 

Selling attributed to this cash weakness took December hogs to a seven-week low and February to a near one-month low early.

 

Cash hogs were mostly US$1 per cwt lower on Monday (Oct 18) and, with more losses likely, there was little interest in buying futures, even after recent steep losses and their discount to the latest Chicago Mercantile Exchange cash index price.

 

"The news is not good, but is it priced in? I don't think so," said Bill Cipolla, an independent hog trader.

 

The latest CME lean hog index was at US$0.7274, while December traded as low as US$0.681 early.

 

More selling in futures was likely in the face of increased hog supplies, rising hog weights and reduced pork demand. Hog weights increase now as they fatten quickly on new-crop corn.

 

The additional pork is coming at a time when pork sales have slowed, a reaction to record high prices late this summer.

 

At 10:08 a.m. CDT (1508 GMT) December hogs <2LHZ0> were off at US$0.6845 and February <2LHG1> was off 0.200 at US$0.73125.

 

Live cattle futures were higher following strong cash cattle markets last week and expectations for higher cash cattle markets this week. Nearby months posted near one-month highs and deferred contracts traded near the contract highs set last week.

 

Expectations were that fed cattle would trade at US$98 per cwt or better this week, after rising US$2 last week to trade at US$97 to US$97.50 per cwt in the southern Plains.

 

Cash beef finished higher late last week, with choice beef at US$154.68, up US$1.44 per cwt.

 

In the futures, October cattle <2LCV0> were up at US$0.9865 per lb and December <2LCZ0> was up 0.425 at US$1.55.

 

Feeder cattle were influenced by weakness in deferred live cattle futures, which, at times, offset support from lower corn futures.

 

October feeders <2FCV0> were off at US$1.63 per lb, November <2FCX0> was up 0.050 at US$1.52 and January <2FCF1> was up at US$1.17.