Chicago | Reuters — Chicago Mercantile Exchange lean hog futures surged three per cent to a seven-month high on Tuesday as rising pork and cash hog prices triggered investment fund and chart-based futures buying, traders and analysts said.
CME live and feeder cattle futures fell to multi-week lows, pressured by ample cattle supplies.
The U.S. Department of Agriculture in a twice-yearly cattle inventory report released after the close of futures trading said the U.S. cattle herd totaled 93.585 million head, up 1.1 per cent from a year ago and above the average analyst estimate of 93 million.
Hogs extended the rally that started in October, with front-month February lean hog futures settling 1.975 cents higher at 69.075 cents/lb., the highest since June (all figures US$). Hogs on a continuous chart have gained nearly 70 per cent since hitting a more than decade-low last year.
The most-active April hog contract was up 1.025 cents to 69.25 cents. The February-April hog spread hit a contract high as traders continued to exit positions in February.
Prices for wholesale pork bellies that are used to make bacon climbed to the highest levels since August 2015, according to the U.S. Department of Agriculture, enticing futures traders to make bullish bets that record-large hog supplies were being offset by rising pork demand.
“It’s clearly evident that pork demand has shifted,” Archer Financial Services broker Dennis Smith said, pointing to USDA monthly cold storage data last week that showed sharply lower pork belly and total pork supplies in December.
Bigger cattle herd
The semiannual cattle inventory data showed larger year-on-year numbers of beef and milk cows that have birthed calves, suggesting the herd still was expanding. A few analysts expected smaller heifer supplies as some ranchers sold off breeding herds due to low prices.
The report “is a rebuke of the statement that we are in liquidation,” said Allendale Inc analyst Rich Nelson. “This pushes off the expected bottom in (cattle prices) for another year.”
Cattle futures extended losses ahead of the inventory data, pressured in part by expectations for weaker trades this week in U.S. Plains cash cattle markets.
CME April live cattle eased 0.65 cent to 114.175 cents/lb. and CME March feeder cattle eased 1.125 cents to 122.775 cents.
— Michael Hirtzer reports on ag commodity markets for Reuters from Chicago.