U.S. hog futures closed higher on Thursday, aided by their discount to cash prices and short-covering ahead of the Labour Day holiday, analysts and traders said.
Live cattle at the Chicago Mercantile Exchange (CME) ended steady to weak, while feeder cattle closed mixed.
CME hogs gained as buyers warmed to futures’ discount to the exchange’s lean hog index at 83.28 cents, although they fetched a slight premium based on cash prices in parts of the Midwest (all figures US$).
October hogs closed up 0.45 cent at 74.15 cents per pound. December finished 0.775 cent higher at 71.8 cents.
Hogs on average in the Iowa/southern Minnesota market were priced at $72.93 per hundredweight, $1.83 lower than Wednesday’s level and down for four straight days, according to the U.S. Department of Agriculture.
“I’m still trying to come up with an explanation for any move higher in the hogs other than the discount, which is beginning to narrow at a good clip,” independent livestock futures trader Dan Norcini said.
Short-covering gave the market added lift despite eroding cash hog values and lackluster demand for pork among wholesalers amid increased hog numbers at heavier weights.
So far this week, an estimated 1.726 million hogs have been processed, up 30,000 from last week and 53,000 more than for the same period a year ago.
Hog farmers moved ahead of schedule after a break from summer heat in recent weeks allowed the animals to gain weight more quickly. Some rushed hogs to market as drought in the Midwest pushed feed costs to all-time highs.
Apart from the thinly traded spot August contract for live cattle futures on the CME, other months settled steady to weak on profit-taking and uncertainty over cash cattle prices, traders and analysts said.
Spot August live cattle, which will expire on Friday, closed up 0.25 cent/lb. at 119.65 cents.
Most-actively traded October ended unchanged at 125.5 cents. December closed down 0.05 cent at 128.45 and February 0.1 cent weaker at 132.15 cents.
Futures fluctuated throughout the morning, stirred at times by leftover buying from Wednesday’s surprising fund-infused rally while divergent cash price views kept the market off balance.
Some expect lower cash returns given one fewer day to process cattle next week due to the Labour Day holiday, reducing packer needs for supplies. Others say tight supplies in parts of the Midwest could force processors to spend more for cattle.
Cash bids in the U.S. Plains held at $117 to $118 per cwt versus asking prices of $122 to $123. A small number of dressed-basis cattle in Nebraska sold at $188 per cwt, generally steady from a week ago, a feedlot manager said.
CME feeder cattle settled weaker, with spot August down 0.225 cent at 140.175 cents. It expired from trading at noon CDT nearly in line with the exchange’s feeder cattle index at 140.42 cents.
September, the new lead month, ended 0.4 cent lower at 143.3 cents amid nervousness about its significant premium to the CME’s index.
October closed up 0.1 cent at 144.9 as corn prices struggled, easing feed costs for cattle feedlots.
— Theopolis Waters writes for Reuters from Chicago.