U.S. livestock: Hog futures gain as supply outlook wanes

Live cattle ease on higher grain prices

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Chicago | Reuters — U.S. lean hog futures climbed on Wednesday, supported by tight supplies and low inventory of available young hogs for producers as summer demand ramps up, traders said.

CME most-active June lean hogs added 2.45 cents, to 109.125 cents/lb., with all contract months but June notching life-of-contract highs (all figures US$).

“Tighter supplies later on this summer should add a bit more premium, especially to these summer contracts,” said Rich Nelson, chief strategist at Allendale Inc. “There’s a seasonal drop in supply.”

Hog slaughter has maintained a higher-than-expected rate through April, when pork production normally begins to slow, Nelson said.

Processors slaughtered 483,000 head on Wednesday, in line with a week ago and 81 per cent more than the same day a year ago, when pork processing ground to a halt due to COVID-19 related disruptions.

The CME’s lean hog index, a two-day weighted average of cash prices, climbed to $107.39/cwt, its highest since October 2014.

U.S. live cattle futures eased, as higher grain prices push producers to sell cattle early to avoid feed costs, creating a surplus of market-ready cattle.

“We’ve got to wait about three weeks, before the offerings from the feedlots begin to slow down,” said Nelson.

CME’s June live cattle futures settled 0.4 cent lower at 115.45 cents/lb., while the nearby April futures added 0.575 cent to 118.95.

Cash cattle prices continue to stagnate around $119/cwt in parts of Kansas, Oklahoma and Texas, according to the U.S. Department of Agriculture.

“Compared to where wholesale beef is at, it’s a clear disappointment,” said Nelson. “There’s a massive disconnect between wholesale beef and cash cattle.”

Choice beef cutouts climbed $1.51/cwt, to $292.50, while select cuts slipped 53 cents, to $279, according to USDA.

Feeder cattle futures dipped, with CME August feeders losing 1.175 cents to close at 148.9 cents/lb.

— Christopher Walljasper reports on agriculture and ag commodities for Reuters from Chicago.

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