October 19, 2010

CME hog futures face pressure of further declines

CME lean hog futures Monday (Oct 18) closed mostly lower with the losses led by most-active December, which was pressured by further declines in cash hog prices.

In the other markets, live cattle ended mixed and feeder cattle were higher.

Lean hog futures were weak from the outset as large supplies of slaughter-ready hogs weighed on futures. In addition, short-position profit taking that helped lift futures on Friday was absent on Monday.

There are too many hogs available to processors in the near term, which could take cash prices down throughout the week, so no one wants to step up and be a buyer in futures, a broker said.

December hit a fresh 6 1/2-month low and closed at its lowest level since March 26. February lean hogs lost 0.45 cents, or 0.6%, giving back what it had gained on Friday, and closed at 72.87 cents.

Live cattle futures prices closed mixed with nearby months higher and deferred contracts lower on declining corn prices.

The lower corn prices allowed live cattle prices for April 2011 and beyond to decline because it will cost less to feed them to slaughter size and fatness, a market analyst said.

Nearby months also were up, possibly by additional buying interest linked to delivery of the October contract. Based on last week's cash prices, October now is about where it should be for delivery action.

Feeder cattle were unevenly higher with support from the lower corn prices.

October live cattle settled 0.92 cents a pound, or 0.94%, higher at 99.07 cents. December was 0.60 cents, or 0.60%, higher at 100.72 cents. October feeder cattle were 0.05 cents a pound, or 0.05%, higher at 108.80 cents, and November was up 0.17 cents, or 0.16%, at 109.55 cents.