Chicago | Reuters –– Chicago Mercantile Exchange lean hog futures sank to their lowest level in five years on Thursday, given ample supplies versus slack pork demand, said traders and analysts.
“Pork demand never recuperated from the high prices we had in the past,” said EBOTTrading.com senior analyst John Kleist.
Pork demand is compounded by the strong dollar, backlog of product on U.S. West Coast docks and possible stiff competition from chicken if more countries bar U.S. poultry over bird flu fears, Kleist said.
Plentiful supplies and sluggish pork sales kept a lid on prices for market-ready or cash hogs.
On Thursday morning, cash hogs in the Midwest sold steady to 50 cents per hundredweight (cwt) weaker than on Wednesday, regional hog dealers said (all figures US$).
The morning’s wholesale pork price slipped 40 cents/cwt to $68.16 from Wednesday, based on U.S. Department of Agriculture data.
Some investors sold CME hogs and bought live cattle futures, given bearish pork fundamentals and jitters ahead of USDA’s quarterly hog report next Friday (March 27).
April closed 2.575 cents per pound lower at 58.125 cents, and May down 2.475 cents to 68.675 cents.
Live cattle extend gains
CME live cattle finished higher for a third straight session on short-covering and futures’ discount to cash price expectations.
April closed 1.425 cents/lb. higher at 158 cents, and June up 1.75 cents, to 150.225 cents.
Cash bids held at $159/cwt against feedlots who are entrenched at roughly $164, said industry sources. Last week, U.S. Plains cash cattle fetched $161-$162.50.
While some packers are short-bought cattle, others are cutting kills to improve their margins and force grocers to compete for less beef.
The day’s beef packer margins were a negative $44.70 per head, compared with a negative $42.45 on Wednesday and a negative $23.25 per head a week ago, according to Hedgersedge.com.
Investors await the government’s monthly Cattle on Feed report on Friday.
CME feeder cattle March futures, which will expire on March 26, felt pressure from its premium to the exchange’s feeder cattle index for March 18 at 212.61 cents.
Remaining feeder cattle contracts drew support from technical buying and live cattle market advances.
March closed down 0.2 cent/lb. to 214.05 cents. April ended 1.725 cents higher at 216.025 cents, and May up 2.25 cents to 215.675 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.