By Theopolis Waters
CHICAGO, March 4 (Reuters) – Chicago Mercantile Exchange hogs on Tuesday closed up their 3-cents per pound daily price limit in anticipation of tight supplies as the deadly pig virus spread on U.S. farms, traders said.
The Porcine Epidemic Diarrhea virus (PEDv) is deadly to piglets and is expected to reduce hog numbers in the United States beginning this spring, which is reflected in futures’ premiums during that time period.
“The lean hog futures market has extremely high price expectations for the March through July period this year, apparently due to expectations of small slaughter supplies due to PEDv losses,” wrote Purdue University economist Chris Hurt in his weekly newsletter.
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“Again no one knows the impact on a national basis, but lean hog futures participants may be expecting losses to be as high as seven to 10 percent,” he said.
Packers raised cash hog bids 11 straight days, and end-users continued to spend more for pork, to build up supplies ahead of possible shortages in the coming months ahead, said traders.
Tuesday afternoon’s average price of hogs in the closely watched Iowa/Minnesota market was $103.28 per hundredweight, up $1.41 from Monday, according to the U.S. Department of Agriculture.
Separate USDA data showed the afternoon’s price of pork at wholesale at $107.54 per cwt, $1.27 higher than on Monday.
The combined hog slaughter for Monday and Tuesday totaled 806,000 hogs, 37,000 fewer than last week and 50,000 less than a year earlier, based on government estimates.
Futures snapped back from initial losses following news that Russia wants more food safety guarantees from two U.S. packing plants before resuming pork imports, initially planned for March 10.
April and June finished 3.000 cents per lb higher at 111.675 cents and 115.750 cents, respectively.
HOGS HELP PUSH UP CATTLE
CME live cattle futures drew support from the limit-up move in the hog market and the seven-day run-up in wholesale beef prices, traders said.
The afternoon’s wholesale choice beef price, or cutout, rose $231.76 per cwt. from Monday to $231.76. Select cuts gained $1.93 to $229.74, based on USDA data.
As beef prices move higher, retailers are buying it on an as-needed basis as they prepare for post-Lenten season advertisements, traders and analysts said.
“Beef and pork are competing meats, so when one goes up the other tends to follow. Given the high price of beef, grocers may put more pork and chicken in those ads than beef,” he said.
Futures gained more ground because of their discounts to last week’s cash cattle prices, which could help support this week’s cash returns, he said.
Last week, cash cattle in Texas and Kansas hit a record high $150 per cwt. Nebraska topped out at a record $152.
April live cattle closed 1.500 cents per lb. higher at 145.625 cents, and June closed at 137.000 cents, up 2.100 cents.
Higher deferred-month CME live cattle boosted feeder cattle futures.
March ended up 1.125 cents per lb. at 172.900 cents, and April closed 1.275 cents higher at 174.350 cents.
