August 1, 2008


US hogs end higher on steep discount as cash holds

US lean hog futures closed higher on Wednesday (July 30, 2008) amid buying generated by their steep discount to cash and the ability of cash markets to hold firm longer than expected.

The latest Chicago Mercantile Exchange lean hog index was 81.87 cents. August hogs began with 78.025 cents and finished at 78.875 cents.


John Kleist, a broker and analyst with Allendale Inc., said, "August is following cash and it's at a discount. We should see a seasonal increase in production coming up here and, as a consequence, I think that the only thing holding us together right now is the discount."


Kleist considered the market oversold after Tuesday's break, especially since cash hog markets held better than expected. Cash hog prices were strong on Wednesday, contrary to early forecasts for weakness.


The USDA on Tuesday (July 29, 2008) increased pork cutout value by 57 cents to US$85.87 per cwt, the highest since May 2004, and close at a record high of US$87.88 per cwt.


Continued strong US pork exports and falling hog weights have cut into pork production. However, packers have kept hog demand active, despite that some plants have shut down this week for maintenance.


August live cattle increased 0.325 cents to 97.875 cents per pound while October went up 0.550 cents to 106.150 cents, near a two-week high. Feeder cattle, lifted by gains in live cattle and support from ongoing expectations of tight feeder supplies, also increased.


August feeder cattle increased 0.250 cents to 112.525 cents per pound while September went up 1.000 to 113.650 cents.

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