CHICAGO, Aug 16 (Reuters) – U.S. lean hog futures declined by as much as 3.8 percent on Tuesday, reversing from earlier three-week highs on fund selling linked to declines in wholesale pork prices, traders said.
Chicago Mercantile Exchange cattle futures also eased but saw smaller declines than hog prices as some investors unwound long hog and short cattle spreads.
Most-active CME October lean hogs finished 2.650 cents lower at 59.850 cents per lb, notching their largest daily losses so far this month and easing from an earlier high of 63.250 cents.
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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.
U.S. Department of Agriculture data released at midday showed a steep drop in pork bellies as seasonal demand for bacon-lettuce-tomato sandwiches waned. After the close of futures trading, USDA said pork bellies eased $14.86 to $80.43
per cwt. The pork cutout, an index of several meat cuts including bellies, was off $2.51 to $73.96 per cwt, the lowest since January..
“It’s getting late in the season and there’s too much freezer stock,” Linn Group analyst John Ginzel said, adding that packers were likely discounting pork bellies to entice retailer demand.
Record production this year of U.S. hogs and pork also limited potential gains in CME hog futures, with many contracts still trading near lifetime lows hit on Aug. 4. Open interest in hog futures fell sharply during Monday’s session of higher prices, suggesting investors were exiting bearish bets and not making bullish new ones, CME Group data showed on Tuesday.
CME October live cattle was 0.575 cents lower at 113.400 cents per lb, settling well off their earlier lows. CME September feeder cattle futures were down 1.500 cents at 145.575 cents per lb, their lowest settlement since Aug. 4.
Some cattle traders were evening up positions ahead of the USDA’s monthly Cattle on Feed report due on Friday, which analysts polled by Reuters expect to show cattle placed on feed during July was slightly above the same month in 2015.
The move lower in cattle confounded some bullish traders, who pointed to recent gains in wholesale beef prices as supportive to futures.
USDA said the choice beef cutout was up 17 cents to $201.84 per cwt, highest in nearly a month.
“None of the weakness makes any sense but that has been the way of the market all year,” analyst David Hales said in his Hales Cattle Letter. He added that investors likely were betting on lower cattle prices in U.S. Plains cash markets.
