Chicago Mercantile Exchange (CME) hog futures fell on Wednesday, pressured by uncertainty regarding near-term cash hog prices, said traders and analysts.
U.S. Department of Agriculture data Wednesday showed the average hog price in the most-watched Iowa/Minnesota market at $73.71. It was $1.09 lower after being up 83 cents on Tuesday (all figures US$).
"There is still a desire to eventually buy this market, but the near-term news is sloppy," said R.J. O’Brien hog futures trader Tom Cawthorne.
Investors are watching the stronger dollar that could have negative implications for meat exports, he said.
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Tight hog supplies are viewed as supportive for cash prices. But cash is feeling pressure from less profitable packer margins and tepid wholesale pork demand.
HedgersEdge.com calculated the U.S. pork packer margins on Wednesday at a positive $1.15 per head versus a positive $1.85 on Tuesday and a positive $5.05 a week ago.
April and June futures drifted below their respective 10-day moving averages of 80.8 and 90.81 cents, triggering fund selling.
And futures’ premium to CME’s lean hog index at 77.5 cents discouraged buyers.
April hogs closed at 80.65 cents per pound, down 0.8 cent. June was 0.975 cent lower at 90.075 cents.
Bullish spreads at times encountered the roll by funds that follow the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).
Funds that track the S+PGSCI moved their spot-April long positions mainly into June and July. Wednesday was the last official day for that roll.
USDA plans sporadic same-day furloughs for all U.S. meat inspectors as the agency trims its budget under automatic spending cuts.
"Without knowing what this (furloughs) means to the industry as a whole adds to an already uncertain market," a trader said.
Cattle fade with cash hopes
Live cattle futures at the CME posted losses in response to weaker-than-expected cash cattle bids, said traders and analysts.
Packers bid $125 to $126 per hundredweight (cwt) for slaughter-ready cattle against $130 and higher asking prices, said feedlot sources.
"This (cash bids) is very disappointing. It seems like feedlots are not going to get better cash prices now," a trader said.
Some traders believe profitable margins and strong wholesale beef prices would lift cash cattle values. But packers may lower cash bids to preserve their margins.
U.S. Department of Agriculture data late on Wednesday showed wholesale choice beef at $197.49/cwt, up 21 cents from Tuesday; select cuts gained 30 cents to $196.
Funds sold after spot April was unable to stay above the 10- and 20-day moving average convergence support level of 129.04 cents.
June slipped beneath 10-day moving average support of 124.26 cents, which triggered fund selling.
April live cattle closed at 128.55 cents/lb., down 0.15 cent. June was 0.425 cent lower at 123.45 cents.
CME feeder cattle closed higher as corn prices weakened which could ease input costs for feedlot operators.
Spot March feeders settled up 0.2 cent/lb. to 139 cents. Most-actively traded April ended at 142.725 cents, 0.525 cent higher.
— Theopolis Waters writes for Reuters from Chicago.
