Chicago | Reuters — Chicago Mercantile Exchange lean hog futures tumbled three per cent on Tuesday, reversing after hitting contract highs as investors locked in profits ahead of Thursday’s U.S. Thanksgiving Day holiday, traders said.
Hog futures had gained in eight out of the past nine sessions on hopes of stronger pork demand, especially in export markets as the African swine fever virus forced farmers to cull hog herds in top producer and consumer China.
But domestic demand for pork typically slows around this time of year. Many retailers have purchased the meat they intend to sell during the holiday season, limiting new orders.
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An increased U.S. hog slaughter also pointed to abundant pork supplies. Late-morning U.S. Department of Agriculture data showed wholesale pork prices, known as the cutout, down $2.37, to $66.44/cwt (all figures US$).
“Midday cutouts were a big factor in the decline (in hog futures),” said Midwest Marketing Solutions analyst Brian Hoops.
“We are going into a period of seasonal weakness… consumers will be stocking up on meat; end users will not,” Hoops added.
CME February lean hogs settled down 1.9 cents at 67.125 cents/lb., off their earlier lifetime peak of 69.5 cents.
Global Commodities Analytics analyst Mike Zuzolo said some traders were unwinding long hog-short soybean spreads. Soybean futures had been sharply lower on Monday, before rising on Tuesday.
“I think we are unwinding spreads ahead of the holiday,” Zuzolo said.
USDA data awaited
Cattle futures were mostly lower, pressured in part by expectations that a USDA report due on Wednesday will show larger amounts of the animals in U.S. feedlots as of Nov. 1.
CME February cattle futures were down 0.275 cent to 119.725 cents/lb. and January feeder cattle were down 0.4 cent, to 146.875 cents.
“Nobody wants to take a lot of positions until they see what that report has to say,” Hoops said.
USDA will release monthly Cattle on Feed and cold storage data during the trading session on Wednesday. Analysts polled by Reuters expected USDA to estimate on-feed supplies at 104.4 per cent of a year ago.
A few analysts estimated pork supplies in cold storage of 573.4 million lbs., which would be down from 598.4 million lbs. a year ago. Beef supplies were estimated at 512.7 million pounds, which would be up from 507 million lbs. last year.
— Michael Hirtzer reports on commodity markets for Reuters from Chicago.
