July 20, 2011

 

US hog futures hit three-month high

 

 

Although pork plants are rushing to provide for an active pork export market, they are delayed by the hot weather, thus, causing US hog futures to increase more than 1% on Tuesday (Jul 19) to a three-month high, according to traders.

 

Cattle futures finished higher and recovered from Monday's (Jul 18) losses on higher beef prices, strong beef exports and solid gains in equities.

 

Temperatures which topped 100 degrees Fahrenheit in the Midwest plus stifling humidity have slowed hog marketings because the animals can get sick or die when transported in hot trucks.

 

"The numbers are not there because of the heat. The weights also are not going to be there," said a trader.

 

In addition to delayed hog marketings, the heat slows weight gains in hogs and they weigh less when sold. Smaller hogs produce less pork.

 

This slowdown comes when pork plants are rushing to fill pork sales to China and other countries. While the export sales have not been confirmed, traders were confident it was export business that pushed wholesale pork prices to near-record highs this week.

 

USDA on Monday reported the average pork price, or cutout, at US$100.38 per cwt, up 31 cents from Friday (Jul 15) and the second highest on record behind US$100.74 on June 27.

 

Sharply higher stock markets took place due to some better-than-expected company earnings, and positive remarks from President Obama on the debt talks caused cattle and hogs to increase. The debt talks have been a concern as failure to reach a deal by August 2 could drive up interest rates and slow the economy.

 

In pit trading, CME August hogs 2LHQ1 closed up 1.200 cents, or 1.22%, at 99.65 cents per lb and October 2LHV1 was up 1.375 cents, or 1.52%, at 91.675.

 

August's close was the highest for a lead month since April 25.

 

Cattle futures advanced with the equity markets, hot weather and higher cash beef prices.

 

The hot weather may slow cattle marketings as it inhibits weight gain in steers and heifers and presents dangerous shipment conditions in trucks.

 

Temperatures have topped 100 degrees Fahrenheit for days in Kansas, Oklahoma and Texas, but low humidity has helped cattle cope with the heat, feedlot sources said.

 

Cash beef prices advanced as USDA on Tuesday morning quoted choice beef at US$181.71 per cwt, up 62 cents from Monday.

 

As in pork, exports remain a bright spot for beef.

 

On Monday, USDA reported 1,285 loads of beef were sold for export last week, that is the largest export load total this year. As of two weeks ago, year-to-date beef exports were up 35% from 2010.

 

August cattle futures 2LCQ1 closed up 0.650 cent, or 0.59%, at 110.500 cents per lb and October 2LCV1 was up 0.525 cent, or 0.45%, at 116.375.

 

Feeder cattle advanced, pulled up by higher live cattle futures. Prices rose despite lower cash prices as feeder cattle flooded auction markets last week and this week.

 

Ranchers in the central and southern Plains have been rushing to sell feeder cattle because drought has damaged pastures.

 

Receipts at the closely watched Oklahoma City auction on Monday were 12,661 head, compared with 7,243 a year ago, USDA said. Prices for feeder steers and heifers were down US$2 to US$5 per cwt versus a week ago.

 

August feeder cattle futures 2FCQ1 closed up 1.000 cent, or 0.74%, at 135.575 cents per lb and September 2FCU1 was up 0.625 cent, or 0.46%, at 136.250 cents.

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