U.S. hog futures hit two-month low as cash prices slide

Chicago Mercantile Exchange (CME) hog futures extended losses for a fourth straight session on Thursday as lower cash hog prices weighed, analysts and traders said.

Losses in the corn market were also blamed for pressing CME hogs to their lowest level in two months.

CME livestock market investors believe cattle and hog producers may feed more animals as corn becomes less expensive, thereby pressuring cash prices later.

"Corn coming down has wrung out some of the premiums we had in the hog market, but I feel it may take some time before producers actually respond to cheaper feed," a trader said.

Packers’ recent lowering of cash hog bids helped return their margins to profitability for the first time since Jan. 30.

U.S. Department of Agriculture data showed the average price for hogs in the most-watched Iowa/Minnesota market on Thursday at $77.78 per hundredweight (cwt), down 69 cents from Wednesday (all figures US$).

The average pork packer margin for Thursday was at a positive 60 cents per head, compared with a negative $3.30 on Wednesday and a negative $16 on Feb. 14, according to HedgersEdge.com.

But cold weather and heavy snowfall in parts of the north-central and western Plains may temporarily disrupt livestock production in the most-affected areas, which could support cash prices in the near term.

USDA estimated that packers on Thursday processed 415,000 hogs, 3,000 fewer than a week earlier and 6,000 fewer than for the same period a year ago.

April hogs ended at 82.375 cents per pound, down 0.575 cent, and June closed 0.65 cent lower at 91.7 cents.

Feb. live cattle up, others down

CME February live cattle futures posted modest gains, drawing support from wintry weather in parts of the Plains, traders and analysts said.

Remaining live cattle contracts struggled amid a cloud of uncertainty hanging over the market, they said.

"This market is anything but clear about where we are right now and most importantly where we’re headed," West Oak Commodities analyst Tom Tippens said.

He cited the price for unsold cash cattle, futures’ ongoing premiums to those prices and a seasonal lull in beef demand.

Tippens also pointed to the USDA’s monthly cattle-on-feed report due on Friday.

Analysts expect the data to show the number of cattle placed in feedlots in January rose slightly from a year earlier.

So far, cash cattle in Texas have been trading at $123/cwt, steady with last week, feedlot sources said. Cash bids elsewhere in the U.S. Plains stood at $123 against asking prices of $125 or higher, they said.

On Thursday, packers processed 98,000 head of cattle, down 21,000 from a week earlier and 25,000 fewer than a year ago, based on USDA data.

In recent weeks, packers have shown less interest in buying cattle at higher prices due to their poor, but improving, margins and sluggish wholesale beef demand.

The wholesale price for choice beef on Thursday was $182.35/cwt, up four cents from Wednesday; select cuts slipped 33 cents to $180.20, according to the USDA.

HedgersEdge.com put the average beef packer margin for Thursday at a negative $50.70 per head, compared with a negative $52.60 on Wednesday and a negative $69.25 on Feb. 14.

Spot February live cattle closed at 125.3 cents/lb., up 0.2 cent.

Most-actively traded April ended 0.4 cent lower at 127.825 cents and June finished at 124.075 cents, down 0.45 cent.

CME feeder cattle closed in unison with the weaker deferred-month live cattle contracts.

March feeders settled off 0.025 cent/lb. at 140.7 cents. April ended at 143.175 cents, down 0.425 cent.

– Theopolis Waters writes for Reuters from Chicago.


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