June 9, 2011


US hog futures climb to two-week high



US hog futures scaled to a two-week high amid speculations that the supply available to US meatpackers may drop on rising demand.


Domestic pork demand is seen to climb. Cattle futures gained on the other hand.


US meatpackers processed 405,000 hogs today, down 4% from the same time last week, Department of Agriculture data show. Poultry farmers are reducing flocks because of high feed costs, which may bolster chicken prices and make pork more competitive, said Rich Nelson, the director of research at Allendale Inc. in McHenry, Illinois.


"We may not have hit our summer low yet" in hog supplies, which tend to decrease in June based on breeding cycles, Nelson said. "We are getting some more helpful tones from the chicken industry. Part of the reason we had low pork demand was because there had been a lot of cheap chicken."


Hog futures for July settlement rose US$0.0185, or 2.1%, to close at US$0.09135 a pound on the Chicago Mercantile Exchange. Earlier, the price touched US$0.092125, the highest since May 20.


In the week ended May 28, commercial hatcheries in the US reduced the number of eggs put into incubators by 2% from a year earlier, the most recent USDA data show. The price of corn, the main feed ingredient, has more than doubled in the past year.


Cattle futures rose on speculation that US meatpackers may pay more for spot-market animals as profits increase. Processors are earning about US$68 per head of cattle this week, up from US$60 last week and losses earlier this year, Nelson said.


"Packers have good incentive to pay up for cattle. These are the strongest margins they've had in a long time," said Doug Houghton, an analyst at Brock Associates in Milwaukee.


Cattle futures for August delivery gained US$0.001, or 0.1%, to US$1.0455 a pound.


Feeder-cattle futures for August settlement declined US$0.00325, or 0.3%, to US$1.248 a pound.

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