Chicago | Reuters — U.S. lean hog futures plummeted by two per cent or more on Wednesday, notching their largest daily declines since March on technical selling and investment fund liquidation, traders and analysts said.
Traders also were taking profits in hogs following their 1-1/2-year highs touched last week and ahead of a quarterly U.S. Department of Agriculture report due on Friday that is expected to show modest expansion in the U.S. herd.
Most-active Chicago Mercantile Exchange August hogs settled 2.625 cents lower at 85.85 cents/lb., with the nearly three per cent declines the largest in the lifetime of the contract (all figures US$). Hogs on a continuous chart eased two per cent for their largest drop since March 21.
August hog futures fell below their 10-day moving average for the first time this month, triggering chart-based selling. Investors were making bets in options that prices would decline.
“There was an awful lot of put buying,” one trader said of options, adding that put volume was centring near the strike price of 86 cents in a futures contract that traded as high as 90.425 cents a week ago.
Cooler temperatures and scattered rains in the Midwest were also seen as negative for hog prices. USDA data released earlier showed average hog weights and hog numbers declining in the week ended June 18, reflecting recent hot temperatures, which took their toll on the animals.
“A little bit of rain will fatten those hogs up,” the trader said.
Live and feeder cattle futures each were mostly higher, rebounding from multiyear lows reached on Monday on short-covering linked to technically oversold conditions.
CME August live cattle settled 0.175 cent higher at 111.625 cents and CME August feeder cattle up 0.9 cent to 140.175 cents/lb.
The narrow gains in cattle futures came despite losses of $5 to $6/cwt in U.S. Plains cash markets this week.
“Live cattle contracts came under early pressure from Tuesday’s weaker cash trade, but held chart support at their Monday lows, generating buying interest,” brokerage Brock + Associates said in a note to clients.
— Michael Hirtzer reports on agriculture and ag commodity markets for Reuters from Chicago.