By Meredith Davis
CHICAGO, Feb 18 (Reuters) – Chicago Mercantile Exchange lean hogs jumped more than one percent on Tuesday, supported by a strong cash market and strength in the broader commodities market, traders said.
“It is a combination of the higher cash (hogs) but it is also related to macro fund buying across the entire commodity sector in general today,” said Dan Norcini, an independent livestock trader.
The Thomson Reuters-Core Commodity Index jumped 1.5 percent, its biggest rise since March 2013. Sixteen of the 19 components on the commodities bellwether were up on the day.
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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.
Strong cash prices were supported by thinning supplies of market ready hogs. Packers were willing to pay higher prices to insure their immediate slaughter needs were covered as they attempt to catch up production in the wake of weather-induced closures and delays, Midwest hog dealers said.
Government data on Tuesday morning showed the wholesale pork price at $95.03 per hundredweight, down 36 cents from Monday.
Summer hog contracts remain strong on the expectation Porcine Epidemic Diarrhea virus (PEDv), which is fatal to baby pigs, will cut the U.S. hog herd.
April hogs ended at up 1.25 percent, or 1.200 cent at 97.375 cents per pound. June finished at 107.325 cents up 1.200 cent.
TIGHT SUPPLIES SUPPORT LIVE CATTLE
CME live cattle futures rallied on Tuesday, supported by tighter supply of cattle for sale this week and expectations of slightly higher cash trade, traders said.
Traders said the list of cattle for sale this week was smaller, by at least 3,000 to 4,000 head in Kansas and Texas, with asking prices ranging between $143 to $145 per hundredweight.
Packer profit margins have fallen in deeply in the last month. Packers made a negative $125 per head on Tuesday, compared with a positive $102.85 per head on Jan. 21, according to data from Hedgersedge.com.
Some packers pulled contract cattle forward early in the month in an effort to avoid paying high prices in the cash market. Severely weaker profit margins will keep them reluctant to pay higher prices, but the plants will need fresh supply soon, traders said.
“Packers still have probably another week of contract cattle, then they will need to trade in the cash market,” said Lane Broadbent, president at KIS Futures.
February live cattle closed 1.150 cent per lb. higher 143.750 cents, and April ended up 1.025 cent at 142.125 cents down.
CME feeder cattle followed live cattle futures higher.
March ended up 1.225 cent per lb at 171.700 cents.
April finished at up 1.850 cent at 173.200 cents.
