Stock market sell-off sinks U.S. hog futures

Chicago Mercantile Exchange (CME) lean hog futures on Friday declined 1.7 per cent as equity markets tumbled following discouraging U.S. economic news, analysts and traders said.

The U.S. stock market at one point was down more than one per cent in response to smaller-than-anticipated government payroll numbers and disappointing March jobs data.

“It’s more of a macroeconomics issue. With the jobs numbers this morning pulling the rug out from underneath the livestock markets,” said Dan Norcini, an independent livestock futures trader.

CME hogs finished down 0.81 per cent for the week, pressured by the futures’ premium to the exchange’s lean hog index at 78.01 cents (all figures US$).

Spot April hogs, which will expire on April 12, closed at 80.025 cents, down 1.4 cents.

Most actively traded June fell 2.325 cents to 89.7 cents. The contract fell below the respective 10-day and 20-day moving averages of 91.1 cents and 90.49 cents to touch off fund liquidation.

Futures retreated despite 12 straight days of gains in cash hog prices. But, some traders believe packers will lower cash hog bids next week to recapture lost margins.

The government on Friday quoted the average hog price at the most-watched Iowa/Minnesota market at $80.96 per hundredweight (cwt), up $2.02 from Thursday.

U.S. pork packer margins on Friday were estimated at a negative $4 per head versus a positive $1.10 on Thursday and a positive $1.30 a week ago, according to HedgersEdge.com.

In March, the cash hog and futures complex were initially pressured because there were more hogs than anticipated, said Paragon Economics president Steve Meyer. Also, pork and beef demand struggled in part because of the cold start to spring, he said.

“Now, pork is really a pretty good value and you’re starting to see people step in and buy it at the wholesale level,” Meyer said.

The Friday afternoon mandatory wholesale pork price, calculated on a plant basis, was $80.60/cwt, up 67 cents from Thursday, according to USDA.

Live cattle sag with Dow

Selling on Wall Street and fund liquidation dropped CME live cattle futures on Friday, for a 1.86 per cent loss for the week.

“We wrapped up the cash trade on Thursday and the cutout can’t seem to sustain upward momentum. So when you don’t have anything else to trade on, you follow the stock market,” said Oak Investment Group president Joe Ocrant.

Cash cattle in the U.S. Plains this week fetched mostly $128-$129/cwt, which was fully steady with a week ago, said feedlot sources.

On Friday, USDA’s wholesale or cutout data showed the average price for choice beef down 40 cents/cwt to $191.32; select cuts fell $1.24 to $187.01.

Spot April live cattle led declines as some traders exited the contract ahead of the first notice day for live deliveries on Monday.

Spot April live cattle closed 1.225 cents per pound lower at 126.025 cents. It opened below where the 10-day and 20-day moving averages converged at 127.14 cents.

Most-actively traded June ended 0.85 cent/lb. lower at 121.5 cents. The contract slipped beneath the 10-and 20-day moving average convergence support level of 122.51 cents, which triggered fund selling.

CME feeder cattle extended losses for a fourth straight day pressured by the lower live cattle futures.

However, the recent pullback in corn prices, which could reduce feed costs for feedlots, drove feeder cattle futures up 6.1 per cent for the week. It was their biggest weekly gain since Oct. 2, 2011.

April feeder cattle settled down 1.325 cents/lb. at 142.575 cents. May ended 1.65 cents lower at 144.3 cents.

— Theopolis Waters writes for Reuters from Chicago.

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