By Theopolis Waters
CHICAGO, April 9 (Reuters) – Chicago Mercantile Exchange hogs finished higher on Wednesday with June up the 3-cent limit as fund buying and short-covering beat back early losses, traders said.
Futures raced to catch up to CME’s hog index at 129.19 cents.
April hogs closed up 1.725 cents per pound to 125.025 cents, above the 20-day moving average of 124.008 but below the 10-day moving average of 125.360 cents.
June ended 3.000 cents higher at 121.750 cents, above the 40-day moving average of 119.738 cents.
As the April contract nears expiration on April 14, traders sold that month and simultaneously bought June futures in a trading strategy known as bear spreading.
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CME hogs stumbled at the start, with deferred months dropping by their 3-cent limit, in response to late Tuesday and early Wednesday’s lower cash hog prices.
Futures buyers turned sellers as record-heavy hog weights helped mitigate production losses pegged to the spread of the Porcine Epidemic Diarrhea virus on U.S. hog farms.
By late Wednesday, some packers paid up for supplies to accommodate the rest of this week’s production. Still, others balked at raising cash bids given sluggish wholesale pork demand.
The afternoon’s average hog price in the closely-watched Iowa-Minnesota market rose 97 cents per hundredweight from Tuesday to $124.25, according to the U.S. Department of Agriculture.
The afternoon’s wholesale pork price tumbled $2.89 per cwt. from Tuesday to $126.95, led by the $4.15 per cwt drop in costs for pork bellies, USDA said.
MOST CATTLE GAIN ON DISCOUNTS
CME live cattle gained on futures’ discount to last week’s cash prices, traders said.
Processors may try to resist spending more for cattle this week given their poor margins and struggling demand for beef at wholesale, a trader said. But they may need cattle enough to hold cash prices steady with last week, he added.
Cash cattle bids in Texas and Kansas stood at $146 per cwt. versus $150 asking prices, feedlot sources said. Last week, cash cattle moved at $148 in Texas and Kansas and at $150 in Nebraska.
The Wednesday evening wholesale choice beef price sagged $1.53 per cwt. from Tuesday to $225.46. Select cuts slumped $1.74 to $215.23, based on USDA data.
Beef packer margins for Wednesday was an estimated negative $111.20 per head, compared with a negative $110.70 on Tuesday and a negative $90.35 a week ago.
April live cattle closed up 0.425 cents per lb. to 143.750 cents. That was below the 40-day moving average of 143.855 cents.
June ended up 0.350 cent at 135.625 cents, above the 40-day moving average of 135.583 cents.
Fund buying and slightly lower corn futures boosted feeder cattle futures.
April closed 0.575 cent per lb. higher at 178.875 cents, and May ended 1.350 cents higher at 180.225 cents.
