Chicago | Reuters — Chicago Mercantile Exchange hog futures closed moderately higher on Thursday, with support from bargain buying and short-covering that pared some recent market losses amid U.S. trade worries, said analysts.
U.S. hog farmers, still reeling from higher retaliatory tariffs on pork imposed by China in early April, are bracing for another round of stiffer import duties to take effect next month.
Bullish investors were also drawn to futures that are undervalued, or a discount, compared to CME’s hog index for June 19 at 85.14 cents.
Softer market-ready, or cash, hog prices, and pork at wholesale, limited futures advances, said traders.
There is talk that wholesale pork values may be close to peaking following their 10-session streak of higher prices, said Hehmeyer Trading + Investments director of commercial agriculture Tom Cawthorne.
“And packers want to build back those margins too,” said Cawthorne.
Margins for some U.S. pork processors are at three-year lows fueled by the recent surge in hog prices and U.S. trade fears.
July hogs ended up 0.45 cent/lb. at 80.475 cents. August closed 0.575 cent higher at 75.725 cents.
Live cattle futures end weaker
CME live cattle were pressured by profit-taking and caution while waiting for the bulk of market-ready, or cash, cattle to change hands, said traders.
Futures’ discount to a small number of cash cattle that traded on Wednesday at $110 per cwt provided underlying market support, they said.
Packer bids for unsold cash cattle in the U.S. Plains were at $108/cwt against $115 asking prices in Texas and Kansas. Last week, Plains cash cattle brought $110-$113.
Some packers may pay roughly the same as last week for supplies given their slipping but still historically high margins, said traders and analysts.
They said other processors might wait for the forecasted increase in cattle numbers soon.
The U.S. Department of Agriculture (USDA) will issue its monthly Cattle on Feed report on Friday.
Simultaneously, USDA will publish its monthly cold storage report. The data is expected to show 451.8 million lbs. of beef and 623.2 million lbs. of pork in U.S. cold storage in May, according to a few analysts.
June live cattle closed down 0.375 cent/lb. at 108.65 cents. August ended 0.525 cent lower at 106.125 cents.
CME feeder cattle mimicked lower live cattle futures. August closed 0.7 cent/lb. lower at 148.725 cents.
— Reporting for Reuters by Theopolis Waters in Chicago.