U.S. livestock: CME lean hogs rise, narrowing discount to cash market

Technical selling drags on live cattle

CME October 2021 lean hogs (candlesticks) with 20-, 50- and 100-day moving averages (pink, brown and black lines) and lean hog cash index (blue line, left column). (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange lean hog futures firmed on Friday, led by the nearby October contract, in a technical and bargain-buying rally that narrowed the market’s sizeable discount to the exchange’s lean hog index, traders said.

Actively traded October futures scaled to a 3-1/2 week peak and closed near its session high, but still remained roughly 14 cents/lb. below the index value. The futures contract and the index should converge come October (all figures US$).

“The discount of the futures to the cash is just too large. And the cash, while it’s coming down, is not coming down fast enough,” said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

CME October hogs ended 2.825 cents higher at 90.725 cents/lb. The contract held technical chart support at its 20- and 50-day moving averages, and buying accelerated as it broke through chart resistance at its 100-day average and a recent high posted last Friday just below 90 cents.

The CME’s lean hog index fell to $104.79 per hundredweight.

CME live cattle futures finished lower on Friday, pressured by technical selling and weighed down by expectations for seasonally slowing beef demand as the end of the summer outdoor grilling season approaches.

Feedlot cattle prices in the southern Plains have been locked in a narrow range for months, which has kept futures price advances subdued, traders said.

Benchmark CME October live cattle ended down 0.475 cent at 129.125 cents/lb. As prices slid lower, the contract filled a chart gap left after the market opened sharply higher on Monday.

October feeder cattle futures settled 0.15 cent higher at 168.425 cents/lb.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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