CHICAGO, Dec 6 (Reuters) – Chicago Mercantile Exchange lean hog futures on Tuesday reached their highest level in two months, fueled by rising cash prices and decent pork demand, said traders.
February and April futures punched through their respective 100-day moving average of 55.845 cents and 62.070 cents, which triggered fund buying and buy stops.
December hogs, which will expire on Dec. 14, closed up 1.875 cents per pound to 53.375 cents. Most actively traded February ended 2.675 cents per pound higher at 57.475 cents.
Profitable packer margins and better-than-expected pork demand lifted slaughter-ready, or cash, hog prices nine straight sessions in the face of record supplies, said Allendale Inc chief strategist Rich Nelson.
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Tuesday morning’s wholesale pork price rose 91 cents per cwt from Monday to $74.97, the U.S. Department of Agriculture said.
Separate USDA data showed the average cash hog price on Tuesday morning in Iowa/Minnesota at $46.69 per cwt, $1.76 higher than on Monday.
Tuesday’s average pork packer margins were estimated at $47.25 per head, up from a positive $46.70 on Monday, according to consultancy HedgersEdge.com.
Firm wholesale beef values, technical buying and CME live cattle futures’ discounts to initial cash prices rallied the exchange’s live cattle contracts, said traders.
December live cattle closed up 2.025 cents per pound at 109.850 cents, and February ended 2.075 cents higher at 111.050 cents.
Both contracts finished above their 109.523 cents and 110.673 cents 10-day moving average, respectively.
On Tuesday morning, a small number of cash cattle in Kansas traded at $112 per cwt, feedlot sources. Last week, cattle in the U.S. Plains brought mostly $114 to $115.
Tuesday morning’s choice wholesale beef price was up 24 cents per cwt from Monday to $191.63. Select cuts increased 25 cents to $173.48, the USDA said.
“Wholesale beef was up yesterday and again today. And investors are walking back expectations of how much cash cattle prices are going to break (decline) in the coming weeks,” said Nelson.
Market participants believe packers will pay less for supplies after strong cash prices in recent weeks shaved their margins.
Fewer animals well be needed by processors as they prepare to close plants during the Christmas and New Year’s holidays.
Fund buying and CME live cattle market advances pulled up the exchange’s feeder cattle futures. January feeders ended 2.525 cents per pound higher at 126.850 cents.
