U.S. hog futures finished higher on Monday as some packers raised bids for cash hogs whose numbers have tightened in recent weeks, said analysts and traders.
Spreaders also bought Chicago Mercantile Exchange (CME) December hogs as the spot October contract prepares to expire on Oct. 12.
Some traders also sold distant trading months and bought December with the view that premiums in the deferred contracts may not be warranted if corn prices continue to come down.
CME spot October hogs closed up 0.15 cent per pound to 81.475 cents. Most-actively traded December ended 0.325 cent higher at 76.875 cents and February at 82.3 cents, up 0.3 cent (all figures US$).
"There are still a lot of hogs out there that could soon work against cash prices. But for now, there aren’t as many hogs as a month or so ago when producers actively liquidated their herds as feed costs skyrocketed due to the drought," a trader said.
The U.S. Department of Agriculture estimated Monday’s hog slaughter at 435,000 head, 2,000 less than a week earlier but 9,000 more compared with the same period a year ago.
Packers will compete for hogs as long as their margins hold up and grocers buy product to feature during National Pork Month in October, he said.
HedgersEdge.com estimated the average pork packer margin for Monday at positive $3.20 per head, which dropped $5.50 from Friday and was down $1.85 versus the margin for Oct. 1.
Live cattle futures settled moderately higher in thin choppy Columbus Day action as wholesale beef prices bounced back after dropping on Friday, traders and analysts said.
USDA Monday morning estimated the wholesale price for choice beef at $190.61 per hundredweight (cwt), 62 cents higher than on Friday and select cuts rose 77 cents to $176.41.
Futures sagged briefly at the start on profit taking. Traders also cited Friday’s wholesale beef price lapse, which typically occurs this time of year as grocers feature more hams and turkeys during the year-end holiday season.
The recovery in wholesale beef values Monday morning had more to do with packers cutting slaughters to get a grip on their elusive margins than demand for beef by retailers, a trader said.
The estimated average beef packer margin for Monday was negative $43.60 per head, compared with negative $15.92 on Friday and negative $52.15 for Oct. 1.
Spreaders also sold deferred contracts and bought nearby trading months as corn prices retreated and amid simmering domestic economic worries.
"I’m wondering if traders may be very hesitant to have long positions in the back end of the market, at a sizable premium, with the problem of the fiscal cliff looming at the end of the year," said David Hales, president of Hales Trading Co.
Meanwhile, investors waited for cash cattle to change hands against the backdrop of 10,600 fewer animals available for sale than last week and unprofitable packer margins.
Today is also the first notice day for deliveries against the spot October live cattle contract that will expire on Oct. 31.
Spot October closed up 0.3 cent/lb. higher at 123.35 cents. Most-actively traded December settled up 0.2 cent at 126.4 cents.
Feeder cattle at the CME settled steady to firmer, helped by modest live cattle market gains and lower corn prices, easing input costs for cattle feedlots.
CME spot October closed unchanged at 144.825 cents/lb. Most-actively traded November ended up 0.1 cent to 146.3 cents and January finished at 149.15 cents, up 0.15 cent.
— Theopolis Waters writes for Reuters from Chicago.