October 22, 2010

Profit taking revives CME hog futures

CME lean hog futures awoke near midday and moved higher on short-position profit taking, cattle/hog spreading and limited selling interest.

In other markets, live cattle ended mixed while feeder cattle gained 1% or more in most contracts.

December hogs, the most-active contract, closed near the day's high and settled at 69.32 cents a pound with a gain of 0.60 cent, or 0.87%. February hogs finished 0.70 cent, or 0.95%, higher at 74.20 cents.

A broker said selling slowed after the initial decline, and some traders who had previously sold were buying back those positions and taking the profits. There was a fair number of cattle/hog spreads being done, that is buying hogs and selling live cattle, because they felt the spread or difference in the prices had become too wide.

As of Thursday (Oct 21) midday, choice grade wholesale beef prices have risen US$6.29 per hundredweight to US$160.97 while the pork carcass value has declined US$5.13 per hundredweight, or 6.3%, so far.

The beef-pork price spread, which compares the difference between the daily choice beef cutout value versus that of pork, shows a recent widening to US$84.05, beef being premium to the pork. That is well above the year-to-date average spread of US$73.42, which likely contributed to the spread trades.

Analysts and brokers also said the market's near oversold status lent some support.

Live cattle futures prices Thursday sagged after a higher open as corn prices faltered and commodity fund-style buyers remained sidelined.

October live cattle settled 0.25 cent a pound, or 0.25%, higher at 101.52 cents. December was 0.37 cent, or 0.36%, lower at 101.25 cents. October feeder cattle were up 1.30 cents, or 1.19%, at 110.70 cents, and November was up 1.35 cents, or 1.22%, at 111.65 cents.

Early strength in cattle came after a higher overnight trade in Globex markets that was seen as the aftermath of a surprisingly strong cash market. Word that packer buyers had renewed bids in the US Plains at US$102 a hundredweight may have helped support the overnight and early pit-traded prices.