U.S. hog futures settled mixed on Friday on sentiment that cash hog prices are close to topping out after recent advances helped futures to their biggest weekly percentage gain in four months, said analysts and traders.
Spreaders also sold Chicago Mercantile Exchange (CME) spot October hogs and bought deferred months as the spot month prepares to expire on Oct. 12.
Still, hogs at the CME jumped nearly six per cent for the week, posting their biggest gain since June 3.
Spot October hogs closed down 0.475 cent per pound to 81.375 cents (all figures US$). Most-actively traded December ended up 0.5 cent to 76.550 cents and February at 82 cents, up 0.325 cents.
Packers bumped up bids for cash hogs this week due to their profitable margins, tighter hog numbers based on reduced hog weights and robust grocer demand for pork.
Late Friday, the U.S. Department of Agriculture reported the average price for hogs in the Iowa/Minnesota hog market at $80.36 per hundredweight (cwt), $1.91 higher than on Thursday when they dropped $1.29.
"This appears to be the turning point in the uptrend in hog prices that for the most part lasted 14 days until Thursday," said Allendale Inc. chief strategist Rich Nelson.
Retail purchases of pork to feature during National Pork Month in October may be wrapping up, said Nelson. And, some producers continue to downsize their herds as corn price remain relatively high, he said.
The wholesale pork price on Friday fell 68 cents/cwt to $84.27, but was up $3.76 from a week earlier, according to USDA.
The government estimated this week’s hog slaughter at 2.355 million hogs, up 10,000 from last week and 20,000 more than a year ago for the same period.
CME live cattle finished higher on Friday, and was up slightly for the week, in response to higher cash cattle prices that triggered short-covering, said analysts and traders.
But, worries about potential deliveries next week, and cash in parts of the Midwest that fell short of expectations, dragged down futures on Thursday and limited advances on Friday.
Spot October, which will expire on Oct. 31, closed 0.725 cent higher to 123.05 cents/lb. Most-actively traded December settled up 0.5 cent to 126.2 cents.
Cash cattle in the U.S. Plains moved at $124/cwt, up $1-$2 from last week, said feedlot sources.
At the start of the week, CME live traders expected processors to cut slaughter rates and spend less for cattle to recoup lost margins.
The cattle slaughter from Monday to Saturday is estimated at 620,000 head, 31,000 fewer than last week and 49,000 less than for a year ago during the same period, said USDA.
The estimated average beef packer margin for Friday was negative $15.92 per head, compared with negative $39.50 for Sept. 28.
But, Lane Broadbent, vice-president of KIS Futures, said packers indicated they needed cattle by bidding $121/cwt on Tuesday, which emboldened sellers to hold out for more money.
Sellers had tight supplies and relatively strong wholesale beef prices on their side, said Broadbent. So, when cattle sold at $124 some they were disappointed that $125 had not traded, he said.
Feeder cattle futures landed in positive territory, and were up nearly one per cent for the week, supported by live cattle market gains and waning corn prices, which could help feedlot demand for younger cattle.
CME spot October closed at 144.825 cents/lb., up 0.35 cent. Most-actively traded November closed 0.375 cent higher at 146.2 cents.
— Theopolis Waters writes for Reuters from Chicago.