Hog futures rose over 3% to end the week, helped by sharply higher pork belly prices.
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Volatility in belly prices has significantly influenced hog futures this year. Wholesale prices climbed over $10 to $114.21 per 100 pounds on Friday morning, a sharp turnaround after bellies lost about half their value since peaking at a record in late July. Analysts say high prices stifled demand when they trickled down to consumers.
"Demand discussions that center over wholesale prices fail to recognize that one needs to wait until the consumer is faced with the shift in price before coming to any meaningful conclusions," said the Steiner Consulting Group in a note to clients.
Friday's pop in belly prices sparked buying among hog futures traders waiting for demand to pick up. October lean hog futures rose 3.3% to 60.975 cents a pound at the Chicago Mercantile Exchange.
Two new packing plants opened in September, which analysts say could help support hog prices by increasing slaughter capacity and allowing meatpackers to meet strong demand for U.S. pork both domestically and in the global export market.
Some market participants, however, caution that oversupply could limit rallies in the near-term. Hog weight gains of 3.5 pounds per carcass since late August amount to over 8 million extra pounds more of pork a week from 30 days ago, according to Ken Morrison, a trader and author of commodity newsletter Morrison On The Markets.
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"There's no evidence yet that the incremental supply over the past month is finding its way into export channels," Mr. Morrison said, with pork export sales reported by the U.S. Department of Agriculture lower over the past four weeks than the same time last year.
Cattle futures, meanwhile, were also higher. Traders are betting that prices in this week's cash trade for slaughter-ready cattle will rise from a week earlier. But sales volume has so far has been limited.
Meatpackers bought around 12,000 head of cattle for an average of $104.51 per 100 pounds live and $167.17 per 100 pounds dressed on Thursday, according to the USDA. Those prices would be steady to higher from a week earlier, but the agency said that sales so far were not enough to establish a trend.
CME October live cattle futures rise 0.8% to $1.0775 a pound.
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(END) Dow Jones Newswires
September 15, 2017 15:28 ET (19:28 GMT)