Chicago/Reuters – Chicago Mercantile Exchange lean hog futures fell more than two per cent on Friday after the U.S. Department of Agriculture in a quarterly report at midday said the hog herd was the biggest since 1943 and larger than analysts anticipated.
Hog futures sank to their session lows after the USDA data was released, before recouping a portion of losses near the end of the abbreviated trading session.
Volume still was relatively light with some investors already away ahead of Monday’s Christmas holiday.
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CME February hogs settled 1.525 cent lower at 63.200 cents per lb, capping a weekly decline of 2.3 per cent as prices lost ground following a five-month high on Monday.
USDA said the hog and pig herd as of Dec. 1 was 71.5 million head, or 104 per cent of last year.
Analysts expected a herd size of 71.1 million or 101.7 per cent of a year ago.
Pork production effectively is the largest ever, as hogs now weigh significantly more than they did in 1943, when the herd reached 83.7 million, according to USDA.
“There’s a much bigger supply of pigs lined up here for the next few months, a lot more hogs to process. This adds to the slightly negative environment after the rally,” said Allendale Inc analyst Rich Nelson.
He said a reduced slaughter during the holiday season cut into demand and further weighed on prices.
Declines in both hog and cattle futures were minimized by monthly Cold Storage data showing 520.3 million lbs of pork and 531.5 million lbs of beef in U.S. freezers in November, each below respective analyst estimates of 566.1 million lbs of pork and 544.6 million lbs of beef.
“That clearly shows retailers were more aggressive (selling) beef than trade expectations,” Nelson said. Most-active CME February live cattle finished 0.500 cent lower at 116.300 cents per lb, declining in profit-taking after earlier hitting a six-month high of 117.375 cents.
CME January feeder cattle eased 0.400 cent to 130.725 cents per lb, drifting lower after a four-month high. USDA also said 10.652 million head of cattle were being fattened on feed for slaughter as of Dec. 1, slightly above estimates for 10.636 million.
New placements on feed in November of 1.843 million head, or 115 per cent of last year, were slightly above estimates of 112.3 per cent of a year ago.
“A bit on the bearish side due to heavier placements,” a cattle and hog broker said of that USDA cattle data.
Additional reporting by Tom Polansek.
