Chicago | Reuters – U.S. hog futures declined on Monday on a mix of softer cash hog prices and technical selling after a run-up to contract highs earlier this month, traders said.
Chicago Mercantile Exchange live cattle futures followed hogs lower.
The benchmark June lean hogs contract fell roughly 3 percent, settling down 2.975 cents at 93.775 cents per pound. October hogs fell 1.425 cents to end at 92.925 cents per pound.
“The biggest reason you are seeing this weakness is because of lower cash prices and the premium that these summer months are carrying (versus futures),” said Craig VanDyke of Top Third Ag Marketing.
Hogs in the Iowa and southern Minnesota cash market were down 33 cents on Monday at $81.39 per cwt, according to the U.S. Department of Agriculture.
Commodity funds hold their biggest net long position in CME lean hog futures since January of 2018, at more than 58,000 contracts, the U.S. Commodity Futures Trading Commission reported. That leaves the market vulnerable to bouts of long liquidation.
Funds have been buying futures on expectations that the spread of African swine fever (ASF) in China, home to the world’s largest hog herd, will boost export demand for U.S. pork to compensate for pigs killed by the incurable hog disease.
“They are buying all the meats maybe because of this ASF deal. They are playing those headlines … The market is susceptible to fast downside moves when you’ve got managed money sitting on that type of position,” VanDyke said.
Managed funds also hold a record-large net long position in live cattle futures totaling more than 152,000 contracts, the CFTC data showed.
CME live cattle futures declined on Monday, with the June contract hitting a one-week low on long liquidation and spillover weakness from hogs.
CME June live cattle futures fell 1.100 cents to settle at 121.575 cents per pound. August live cattle futures closed down 0.975 cent at 118.775 cents per pound.