U.S. hog futures climb as cash expected to rise

Chicago Mercantile Exchange (CME) hog futures closed higher on Monday as traders anticipated a rebound in cash hog prices by covering short positions, traders and analysts said.

Spot February hogs settled 1.025 cents per pound higher at 85.225 cents. Most-actively traded April ended at 87.85 cents, up 0.725 cent (all figures US$).

Packers may raise cash hog bids this week as their margins and wholesale pork demand show seasonal improvements, one trader said.

The U.S. Department of Agriculture on Monday morning quoted the average hog price in the eastern Corn Belt down 69 cents per hundredweight (cwt) from Friday to $79.04. Prices elsewhere in the Midwest hog region were not available.

HedgersEdge.com put the average pork packer margin for Monday at a negative $1.30 per head, compared with a negative $5.40 on Friday and a negative $5.70 on Jan. 7.

Hog farmers appear to be current in sending their animals to market based on the decline in hog weights, making them less available to packers.

The government showed average hog weights nationally last week at 276 lbs., down one pound from the week before and three pounds lower than for the same period a year ago.

End of the roll

CME live cattle settled mixed on consolidation after Friday’s market losses, analysts and traders said.

Monday was the last official day for the Standard & Poor’s Goldman Sachs Commodity Index (S+PGSCI) roll. Funds that follow the index shifted their long February CME live cattle and hog positions mainly into the April and June contracts.

Live cattle spot February closed at 130.35 cents/lb., down 0.25 cent. Most-actively traded April ended at 134.75 cents, up 0.2 cent.

Traders wait for feedlots to count the number of cattle up for sale this week. Cash cattle last week moved at mostly $126-$128/cwt, steady to down $2 from last week.

Packers will again be mindful of their poor margins, which means they may avoid spending more for supplies.

HedgersEdge.com put the average beef packer margin for Monday at a negative $62.80 per head, compared with a negative $65.10 on Friday and a negative $55.40 on Jan. 7.

Investors are watching wholesale beef prices to see whether they can break through resistance at roughly $196/cwt, a sign that retailers are booking product to feature in late January and early February.

"The market is having to deal with a good dose of reality as we have trouble with our beef demand and cash values last week began to slide back some," said West Oak Commodities analyst Tom Tippens.

The price for wholesale choice beef on Monday morning was $194.35/cwt, up 11 cents from Friday, according to USDA.

Feeder cattle futures extended losses on technical selling and surging corn prices.

Spot January ended 0.425 cents/lb. lower at 149.45 cents. Most-actively traded March was 151.425 cents, down 0.025 cent.

– Theopolis Waters writes for Reuters from Chicago.