U.S. hog futures climb with pork prices

Chicago Mercantile Exchange hog futures on Wednesday notched their third straight day of hitting a two-year high, with planned U.S. July Fourth holiday cookouts boosting pork prices, traders and analysts said.

And, they said, consumers are switching from expensive beef to relatively less-costly pork.

Wednesday morning’s mandatory wholesale pork price data, or cutout, calculated on a plant-delivered basis, was $101.33 per hundredweight (cwt), up $2.59 from Tuesday, according to the U.S. Department of Agriculture (all figures US$). The price was the highest since USDA began issuing the mandatory dataset in January.

CME hogs fed off of the recent upswing in cash hog prices amid a seasonal supply slowdown. Processors trimmed slaughter rates to offset fewer hog numbers and stabilize their fallen margins.

“Packers haven’t been able to shrink their slaughter schedules as fast as the tightening in the hog supplies,” said Linn Group analyst John Ginzel.

From Monday to Wednesday, packers processed 1.197 million hogs, down 20,000 from a week earlier, based on USDA estimates.

HedgersEdge.com calculated U.S. pork packer margins on Wednesday at a negative $7.10 per head, compared with a negative $4.70 on Tuesday and negative $3.25 a week earlier.

August led gainers as funds sold the July contract and bought deferred months in accordance with the Goldman Sachs Commodity Index roll.

Funds that follow Standard and Poor’s Goldman Sachs Commodity Index shifted their July long positions into August. Wednesday was the fourth of five days of that roll.

CME June hogs closed up 0.675 cents at 100.95 cents, and July ended at 99.175 cents, or 0.025 cents higher. August settled one cent higher at 97.6.

CME live cattle posted modest losses after investors took profits while awaiting this week’s cash sales, traders and analysts said.

Isolated cash cattle bids surfaced in the U.S. Plains at $120/cwt with no offers from sellers, feedlot sources said. A small number of cash-basis cattle last week moved at $122 to $124.

Profitable packer margins could underpin cash cattle prices while mixed wholesale beef prices weigh, analysts and traders said.

On Wednesday morning, USDA data showed the wholesale price of choice beef, or cutout, dropped 79 cents/cwt to $202.20, while select cuts rose 59 cents to $184.75.

Estimated packer margins for U.S. beef on Wednesday were a positive $51 per head, compared with a positive $48.10 on Tuesday and a positive $43.55 a week earlier, according to HedgersEdge.com.

Additionally, processors bought fewer cattle in recent weeks which resulted in more supplies now which could pressure cash, a trader said.

June cattle and August ended down 0.175 cent to 120.15 cents and 119.525 cents, respectively.

CME feeder cattle climbed as corn prices fell in response to larger-than-expected USDA corn stocks projections. Cheaper feed could reduce input costs for cattle feeding operators.

Spot August settled 1.25 cents/lb. higher to 145.925 cents and September was at 147.925 cents, up 1.125 cents.

— Theopolis Waters reports for Reuters from Chicago.

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