U.S. livestock: Lean hog futures rise as cash market firms

Rally pauses in CME cattle futures

CME June 2021 lean hogs with Bollinger (20,2) bands. (Barchart)

Chicago | Reuters — U.S. lean hog futures rose on Tuesday, with the benchmark June contract setting a life-of-contract high on firm cash hog prices and signs of tightening supplies at a time of robust demand for pork, analysts said.

On the Chicago Mercantile Exchange, most-active June lean hog futures settled up 0.8 cent at 106.025 cents/lb., after reaching a contract high at 106.375 cents.

The CME’s lean hog index, a two-day weighted average of cash hog prices, climbed to $97.38/cwt, its highest since October 2014.

“The hog market is just strong. Disease issues across the hog belt in the Midwest have been huge,” said Don Roose, president of Iowa-based U.S. Commodities. Futures continue to draw support from the U.S. Department of Agriculture’s March 25 quarterly hog report, which showed a smaller-than-expected U.S. herd, Roose noted.

However, the U.S. pork cutout, an indication of wholesale pork prices, fell 95 cents to $106.89/cwt on Tuesday afternoon, retreating after a firmer reading at midday.

Consumer demand for pork and beef is rising as the summer grilling season approaches, and at the same time, the restaurant sector is stocking up in anticipation of a vaccine-driven economic recovery.

Strengthening wholesale beef prices have buoyed CME cattle futures since mid-March, but futures closed lower on Tuesday as traders paused to see if the cash cattle market would keep pace.

Benchmark CME June live cattle futures ended down 0.425 cent at 122.225 cents/lb. CME May feeder cattle finished unchanged at 152.2 cents, paring gains after setting a contract high at 153.475 cents.

Market-ready cattle traded in the Plains cash markets last week at around $115/cwt, up $1 from the previous week, and feedlots were seeking $118-$120 this week, traders said. However, front-month April cattle futures are already trading at a premium to those levels, near the equivalent of $121.

“We are waiting for the cash to catch up,” Roose said.

Beef prices continued to march higher, with choice cuts up $5.30 at $244.83/cwt, according to USDA. Select cuts rose $3.42, to $235.92/cwt.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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