Hog Futures Tumble to Month-Low

By Benjamin Parkin Features Dow Jones Newswires

Hog futures fell over 3% as hedge funds got out of long positions in the market.

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Lean hog contracts for December at the Chicago Mercantile Exchange fell 3.7% to 59.975 cents a pound on Tuesday, the 10th-consecutive day of losses and lowest close since Oct. 9.

The hog market has come under sustained selling pressure recently as supplies build. Meatpackers have slowed the rate of hog slaughter, leaving producers with herds of fattened pigs that they need to offload.

That's allowed packers to command lower cash prices for physical hogs in November, helping their margins in the process. Processing margins climbed above $40 a head this week, according to calculations by The Wall Street Journal, more than doubling from late October. Producers are expected to expand further their herds next year, exacerbating the supply pressure.

Hedge funds and other speculative investors have built large net long positions in the hog futures and options market. The Commodity Futures Trading Commission said that, as of last Tuesday, money managers increased their net long position to 78,206 contracts, up 15% from a week earlier.

That bullish stance in the face of a difficult price outlook prompted some to unwind those positions on Tuesday, analysts said.

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Cattle futures were also under pressure as funds got out of their long positions, according to Brian Hoops of brokerage Midwest Market Solutions.

Money managers had increased last week their net long in cattle futures and options to 132,032 contracts, according to the CFTC, up 10% from a week earlier.

CME December live cattle futures fell 0.9% to $1.195 a pound. Contracts for feeder cattle, which have to be fattened before slaughter, also fell.

Traders are looking ahead to a monthly government cattle supply report on Friday. Analysts expect the U.S. Department of Agriculture to show a 5.7% increase in the total number of cattle being fattened in feedlots as of Nov. 1 from a year earlier, according to an average of estimates compiled by The Wall Street Journal.

Cattle placed in feedlots in October for fattening, an indication of slaughter-ready supplies in several months time, are expected to rise 7.6%. Cattle marketed in October, or sent to slaughterhouses, will likely rise 5.4%, analysts say.

Write to Benjamin Parkin at benjamin.parkin@wsj.com

(END) Dow Jones Newswires

November 14, 2017 15:49 ET (20:49 GMT)