U.S. livestock: CME lean hogs climb on strong cash

Live cattle also higher

CME October 2021 lean hogs (candlesticks) with 20-, 50- and 100-day moving averages (pink, brown and black lines). (Barchart)

Chicago | Reuters — Lean hog futures on the Chicago Mercantile Exchange rose nearly three per cent on Monday on technical buying and relatively strong cash hog markets, analysts said.

CME’s benchmark October hog contract settled up 2.475 cents, or 2.9 per cent, at 89 cents/lb., pushing just above chart resistance at the contract’s 100-day moving average (all figures US$).

Hog futures drew support from an unusually large discount to cash prices, a sign that futures may be under-priced. The CME’s lean hog index, a two-day weighted average of cash prices, was at $109.90/cwt, or about 110 cents/lb., compared to October futures at 89 cents.

“You’re seeing historically wide discounts in futures (compared) to cash. The cash (price) is dropping, but not fast enough,” said Don Roose, president of Iowa-based U.S. Commodities.

The relative strength in the cash market overshadowed pressure on futures tied to expectations of a seasonal rise in hog weight gains and slaughter, as well as waning export demand for pork from China, a top buyer, Roose said.

The hog market also shrugged off pressure from a drop in wholesale pork prices. The U.S. pork cutout was priced on Monday afternoon at $119.35/cwt, down $6.33 from Friday, data from the U.S. Department of Agriculture showed.

In the cattle markets, CME live cattle futures closed higher as rising beef prices and robust meat packer margins fueled expectations that cash cattle prices will climb this week after months of range-bound activity.

CME benchmark October live cattle settled up one cent at 129.125 cents/lb., while September feeder cattle futures ended down 1.075 cents at 162 cents/lb.

“The feeling is (that) we are going to try to make a move to the upside on cash, this week or next week. The packer making $875, $900 a head, it looks wrong not to pay up. And the feedlot (cattle) numbers are tightening,” Roose said.

Packer margins for cattle on Monday reached $901.40 per head, up from $671.70 a week ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC.

In the wholesale beef market, choice cuts rose $4.97, to $329.80/cwt, according to USDA. Select cuts rose $5.53, to $303.55/cwt.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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