Strong cash prices lift U.S. hog futures

Chicago Mercantile Exchange hog futures climbed Thursday on higher prices for hogs in the cash market, traders and analysts said.

They also cited fund buying after the February contract broke through the 100-day moving average of 89.21 cents (all figures US$).

Spot February hogs settled 1.075 cents per pound higher, or up 1.25 per cent, at 87.05 cents. Most-active April ended at 89.675 cents, 1.675 cents higher, up 1.9 per cent.

"The cash market keeps rallying which caught a lot of people short the market. Weather might be feeding into it a little, but I think packers need to fill meat orders for next week," independent hog futures trader James Burns said.

The average hog price in the most-watched Iowa/Minnesota market on Thursday was $87.75 cents per hundredweight (cwt), up 17 cents from Wednesday, according to the U.S. Department of Agriculture.

Bone-chilling temperatures in parts of the Midwest are forcing some hog farmers to keep doors to swine buildings closed to retain as much heat as possible, slowing the movement of hogs to packers.

Lower hog weights suggest producers are on schedule in terms of sending their animals to market, thereby giving them more leverage in price negotiations.

Cattle bottoming out?

CME live cattle futures ended narrowly mixed, supported by sentiment that cash cattle prices have bottomed out and pressured by caution ahead of USDA’s monthly cattle report on Friday.

Spot February closed at 125.875 cents/lb., 0.1 cents or 0.08 per cent higher. April ended down 0.1 cent or 0.08 per cent lower, at 130.350 cents.

However, futures jumped in after-hours trading in response to cash prices in Nebraska of $123/cwt, feedlot sources said. They were up $1 from Wednesday’s sales in the U.S. Plains at $122, but still $1 to $2 below a week ago, they said.

At 14:55 CST, spot February was 1.025 cents higher, or up 0.81 per cent, at 126.8 cents.

Packers tried to control cash spending to realign their margins and stabilize fallen wholesale beef values, one trader said. But realizing they may be running into a tight supply situation next week likely prompted them to buy cattle up north, he said.

HedgersEdge.com put the average beef packer margin for Thursday at a negative $40.95 per head, compared with a negative $36 on Wednesday and a negative $36.95 on Jan. 17.

The price for wholesale choice beef Thursday morning was $188.15/cwt, $1.63 cents lower than Wednesday; select cuts dropped 60 cents to $182.30, according to USDA.

Investors tweaked positions before the government’s monthly cattle-on-feed report on Friday, which limited early-session futures advances.

Analysts expect Friday’s report to show the number of cattle placed in feedyards last month rose for the first time in seven months as prolonged drought withered wheat grazing land.

CME feeder cattle followed firmer deferred-month live cattle market advances and weaker corn prices.

January feeder cattle futures ended 0.4 cents/lb. higher, or up 0.28 per cent, at 144.6 cents. Most-actively traded March finished at 147.95 cents, up 0.8 cents, or 0.54 per cent higher.

– Theopolis Waters writes for Reuters from Chicago.