June 11, 2010

US hog futures decline as pork slump dims processor demand

Hogs fell for the first time in three sessions as slumping pork prices discouraged US meat processors from buying more animals.

Wholesale pork has plunged 9.7% since touching a 21-month high on May 14, government data show. The average cash price that slaughterhouses pay for immediate delivery of hogs has declined 4% this month, according to the USDA.

Hog futures for July settlement fell 0.225 cent, or 0.3%, to 80.05 cents a pound on the CME. The most-active contract has gained 22% this year, partly because farmers reduced the size of the US herd.

Pork demand may decline after the Memorial Day and Father's Day holidays in the US. The strength of the dollar, up 18% this year versus the euro, may be curbing overseas demand for US meat, analysts said.

Analysts also believe that the significant change in value between the euro and the US dollar has changed the competitive landscape and that Europe is taking export share from the US, adding that this, combined with demand elasticity, owing to a fast run-up in prices, is pressuring US pork prices.

Meanwhile, cattle futures gained as speculative investors may have bought back short positions, or bets that prices would fall, analysts said.

Cattle futures for August delivery rose 0.3 cent, or 0.3%, to 87.775 cents a pound on the CME. Feeder-cattle futures for August settlement gained 1 cent, or 0.9%, to US$1.10225 a pound.