Livestock futures were mostly higher on Wednesday, with hog prices leading gains.
Large supplies of physical hogs have burdened the market at various points in recent months. But a series of short- and long-term factors, from bouts of freezing weather to growing slaughter capacity at new packing plants, have helped chip away at the surplus of fattened hogs.
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That dynamic was reflected most clearly in the April-dated lean hog contract, said Craig Turner of Daniels Trading in Chicago, when the supply squeeze would likely become more acute. Meatpackers would have to pay more money for physical pigs in order to fill their slaughterhouses.
"There are facilities that are coming online that are going to need hogs and we don't have the supply," Mr. Turner said.
April lean hog futures rose 1.4% to 75.7 cents a pound at the Chicago Mercantile Exchange, while the front-month February contract rose 0.9%.
Prices in the physical hog market have been under pressure this week, however. Packers paid an average of $68.83 per 100 pounds on Tuesday, down 83 cents for the day, and were expected to pay steady to lower money again on Wednesday.
The snowstorm in the central U.S. this week slowed the flow of hogs to some facilities and forced others to close temporarily, analysts said. That slowed pork production, however, pushing red meat prices higher.
Cattle futures were also higher. CME February live cattle futures rose 0.6% to $1.25425 a pound. Contracts for feeder cattle were lower.
No cattle traded at the online Fed Cattle Exchange auction on Wednesday morning, but analysts expected physical prices to rise this week. Some cattle traded in Kansas at $123 per 100 pounds on Tuesday, the U.S. Department of Agriculture said, which was steady with last week. Market observers said packers were bidding around $122 on Wednesday.
A sharply lower U.S. dollar, meanwhile, further supported livestock prices on Wednesday, helping U.S.producers who rely on exports.
"A cheaper dollar discourages meat imports while encouraging exports, providing modest support for futures," said Arlan Suderman of INTL FCStone Inc.
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(END) Dow Jones Newswires
January 24, 2018 15:10 ET (20:10 GMT)
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