Chicago Mercantile Exchange hog futures settled lower on Tuesday, pressured by profit taking after posting new contract highs three days in a row, traders said.
CME December hogs ended 0.600 cent per lb lower at 91.350 cents after easing from a new contract high in electronic trading of 92.200 cents.
February closed down 0.450 cents per lb at 94.100 cents, finishing off its new contract high of 94.750 cents.
Before Tuesday’s session, CME hogs garnered support from bouts of higher cash and wholesale pork values. December futures were undervalued based on the exchange’s hog index.
And worries that the spread of the porcine epidemic diarrhea virus (PEDv), which is fatal to piglets, on U.S. hog farms could reduce supplies, motivated buyers.
On Tuesday, demand for pork at wholesale faded and packers lowered bids for cash hogs.
Tuesday afternoon’s wholesale pork price was at $94.04 per hundredweight (cwt), down 77 cents from Monday, according to the U.S. Department of Agriculture.
USDA data showed the average cash hog price in the closely watched Iowa/Minnesota market was at $85.03 per cwt Tuesday afternoon, down 35 cents from Monday.
December future’s once-bullish relationship to CME’s hog index soured after that index slipped to 91.12 cents from 91.48 cents.
And investors wondered whether deferred-month hogs had already factored in the potential impact of the PEDv virus on future pork production.
“It gets to the point where you have to justify why we’re (futures) at these levels,” a trader said.
Beef prices underpin cattle
CME live cattle moved higher after wholesale beef prices rose in six of the past seven days, traders and analysts said. Packers raised wholesale costs to counter last week’s $132 per cwt record high cash price. That move helped processors recover some lost margins.
Tuesday afternoon’s wholesale choice beef price was $204.24 per cwt, $1.12 higher than on Monday, and approached the June 5 high of $204.40. Select cuts rose 62 cents to $188.12.
U.S. beef packer margins on Tuesday were estimated at a negative $38.20 per head, compared with a negative $52.35 on Friday, and a negative $48.20 a week ago, according to HedgersEdge.com.
Those who traded October futures, which will expire on Oct. 31, are expecting cash sales at a minimum of steady with a week ago supported by beef price strength.
Market bears sold October in anticipation of weaker cash returns as processors focus on improving their margins. And there are more cattle up for sale this week.
Investors await the USDA’s monthly cattle-on-feed and cold storage reports on Thursday Oct. 31. The government postponed the Oct. 18 cattle survey and Oct. 22 cold storage data due to the U.S. government shutdown.
Analysts polled by Reuters said U.S. feedlot cattle placements likely increased 1.2 percent in September from a year earlier as lower-cost corn encouraged feedlots to buy young cattle to fatten.
October live cattle futures closed up 0.250 cent at 133.400 cents per lb, with December 0.475 cent higher at
CME feeder cattle finished weaker as traders sold October futures before that contract also expires on Oct. 31. Profit-taking weighed on remaining feeder cattle futures.
October feeder cattle closed at 165.425 cents per lb, 0.550 cent lower, and November ended at 166.750