U.S. hog futures fall on cash price sentiment

U.S. hog futures were lower on Thursday, pressured by profit-taking prompted by sentiments that cash hog and wholesale pork prices would trend lower, analysts and traders said.

Chicago Mercantile Exchange (CME) December hogs led declines as some traders exited that contract ahead of its expiration on Dec. 14.

Selling in February futures accelerated after it broke through the 40-day moving average of 85.49 cents. That touched off fund liquidation and sell stops.

Spot December hogs settled at 83.45 cents per pound, 1.55 cents lower, or 1.82 per cent. Most-actively traded February finished at 84.45 cents, down 1.2 cents, or 1.4 per cent (all figures US$).

Packers are seen lowering cash hog bids, which had increased 11 days in a row. Those higher prices eroded packer margins, said traders. Also, current supplies outpace demand for hogs and pork, they said.

"Demand for pork will likely ease a little bit as retailers finish up holiday business that they needed to do," said Citigroup futures specialist Art Liming.

The average price for hogs in the western Midwest direct market Thursday morning dropped $2.87 per hundredweight (cwt) from Wednesday to $82.73, according to the U.S. Department of Agriculture.

However, traders awaited the government’s evening hog price data that includes a larger sampling of packers.

HedgersEdge.com put pork packer margins for Thursday at a negative $6.05 per head, compared with a negative $5.05 on Wednesday and a positive $5 for Nov. 29.

Most cattle recover

Aside from CME December live cattle futures that ended down slightly, other contracts firmed after fund buying capped another choppy trading session, said traders and analysts.

Spot December closed down 0.075 cent/lb., or 0.06 per cent, to 126.075 cents. February closed 0.5 cent higher, or up 0.38 per cent, at 131.025 cents.

Before settling closer to cash price expectations of about $125/cwt, December futures fluctuated on either side of its 40-day moving average of 126.45 cents.

Following earlier losses, February attracted buying interest after testing the 200-day moving average of 130.06
cents, sending the contract above the key 100-day moving average of 130.78 cents.

"It was all technical buying and selling, with nothing fundamentally moving the market. All’s quiet on the cash front and the cutout was lower," a trader said.

The government’s Thursday morning wholesale price data, or cutout, showed choice beef at $194.32/cwt, down 57 cents from Wednesday, and select cuts fell $1.24 to $173.59.

Packers bid $123/cwt for cash cattle in the U.S. Plains while feedlots priced their animals at $126 to $128, said feedlot sources. Cash cattle last week moved at $125 to $126.

Packers will try to avoid spending more for cattle by drawing from ample inventories. They also will try to stabilize their fallen margins and underpin wholesale beef prices.

There are about 40,000 more cattle up for sale this week, industry sources said.

HedgersEdge.com put beef packer margins for Thursday at a negative $58.70 per head, compared with a negative $58 on Wednesday and a negative $76.70 for Nov. 29.

CME January feeder cattle were lifted by mostly higher live cattle, fund buying and the pullback in corn prices.

January feeder cattle closed 1.85 cents/lb. higher, or 1.26 per cent, at 148.25 cents. March finished at 150.8 cents, up 1.75 cents, or 1.17 per cent.

– Theopolis Waters writes for Reuters from Chicago.