CHICAGO, Dec 8 (Reuters) – Chicago Mercantile Exchange lean hog futures rallied for a fourth consecutive session on Thursday, spurred by higher cash prices and technical buying, said traders.
December hogs, which will expire on Dec. 14, closed up 0.975 cent per pound to 55.675 cents. Most actively traded February ended 1.075 cents per pound higher at 60.825 cents and topped its 200-day moving average of 61.367 cents.
“It’s a combination of both supply and demand,” a Midwest hog merchant said. He said fewer animals are available as frigid temperatures in the region slow down animal weight gains.
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As the harvest in southern Alberta presses on, a broker said that is one of the factors pulling feed prices lower in the region. Darcy Haley, vice-president of Ag Value Brokers in Lethbridge, added that lower cattle numbers in feedlots, plentiful amounts of grass for cattle to graze and a lacklustre export market also weighed on feed prices.
He added that packers are competing for hogs while taking advantage of their profitable margins.
Thursday morning’s prices for slaughter-ready, or cash, hogs in Iowa/Minnesota averaged $50.20 per cwt, 44 cents higher than on Wednesday, the U.S. Department of Agriculture said.
Investors and hog merchants expect cash and wholesale pork prices to peak as packers prepare to shut down plants over the Christmas and New Year’s holidays.
Separate U.S. government data on Thursday morning showed the average wholesale pork price dropped 36 cents per cwt from Wednesday to $74.77.
CME live cattle futures declined in anticipation of potentially lower cash prices next week, said traders.
They said short-covering, firm wholesale beef prices and futures’ discounts to this week’s cash prices lifted contracts from session lows.
December live cattle closed 0.325 cent per pound lower at 109.050 cents, and February ended down 0.125 cent to 110.650 cents.
Packers may avoid spending more for supplies by cutting slaughters, which could help put their margins back in the black and improve wholesale beef demand, said traders and analysts.
This week packers purchased a small number of cash cattle in the U.S. Plains for mostly $112 per cwt, down from the bulk of animals that last week sold at $114 to $115, said feedlot sources.
Wednesday morning’s choice wholesale beef price was 91 cents per cwt higher than on Tuesday at $189.85. Select cuts were up 2 cents to $171.74, the USDA said.
Average beef packer margins for Thursday were a negative $10.40 per head, down from a positive $7.35 on Wednesday and a positive $40.10 a week ago, as calculated by HedgersEdge.com.
Technical selling and weaker live cattle futures pressured CME feeder cattle contracts. January feeders ended down 0.375 per pound at 126.600 cents.
