Hog futures rose as signs of ample demand for U.S. pork fueled speculation that last week’s price slide was exaggerated. Cattle declined, capping the longest slump since 2008.
Spot-market hogs sold for 83.89 cents a pound today, 8.7 cents above October futures. Wholesale pork has climbed 61 percent in the past year. Exports of the meat rose 7.9 percent in the first half from a year earlier, and demand in the U.S. is “quite strong,” said Dan Vaught, the owner of Vaught Futures Insights in Altus, Arkansas.
“As long as some of these wholesale cuts remain stable, the outlook seems to improve,” Vaught said. Futures have “already built in some pretty substantial discounts to cash, so at this point, traders are really trying to gauge how much seasonal weakness the market will experience,” as meatpacker supplies rise based on hog-breeding cycles, he said.
Hog futures for October settlement climbed 0.275 cent, or 0.4 percent, to close at 75.15 cents a pound at 1 p.m. on the Chicago Mercantile Exchange. The most-active contract dropped 3.1 percent last week and 4.9 percent this month. The CME’s Lean Hogs Index, the gauge of spot prices, rose 1.1 percent in August. As of yesterday, wholesale pork dropped 3.6 percent from a record on Aug. 24 to 93.26 cents a pound, U.S. Department of Agriculture data show.
Cattle Market
Cattle futures for October delivery slipped 0.775 cent, or 0.8 percent, to 97.275 cents a pound. The price was down for the sixth straight session, the longest slide since December 2008. The commodity gained 2.8 percent this month.
Feeder-cattle futures for October settlement fell 0.825 cent, or 0.7 percent, to $1.151 a pound.
The price of steers for immediate delivery to meatpackers rose 0.3 percent last week to about 99 cents a pound, USDA data show. Some traders are “pessimistic” that prices will climb further because beef demand may slow after the Labor Day holiday weekend starting Sept. 4, when many people grill outdoors, Vaught said.
Earlier, cattle futures rose as much as 0.3 percent on speculation that meatpacker demand for animals will increase as profit improves. In August, wholesale choice beef climbed 8.1 percent through midday, heading toward the biggest monthly rally since March. Meatpackers are making almost $20 per head of cattle in profit and may boost spot bids for animals, said Dennis Smith, a senior account executive at Archer Financial Services Inc. in Chicago.
“Tight supplies versus good demand is what brought us here, and that trend remains intact,” Smith said. “Beef-packer margins are very profitable. They have every incentive to keep pushing for cattle.”