Hog futures surged to a two-week high on Wednesday as a government report showed falling pork stocks.
The U.S. Department of Agriculture said in a monthly report that stocks of frozen pork fell to 597.3 million pounds on Oct. 31, down 3% from a month earlier and slightly lower than the same time last year.
Lower frozen reserves came despite growing supplies of lean hogs. Meatpackers have slowed the pace of hog slaughter in recent weeks, limiting the buildup of red meat and strengthening pork prices. Wholesale pork rose $1.16 to $82.03 per 100 pounds as of midday Wednesday. Pork processing margins, in turn, have doubled in less than a month.
But analysts were concerned that lower kill numbers could exacerbate oversupply of hogs as more reach their requisite slaughter weights with nowhere to go.
Lean hog futures for December rose 3.5% to 62.825 cents a pound at the Chicago Mercantile Exchange, the highest close since Nov. 9.
The USDA also said that stocks of pork bellies, used to make bacon, rose sharply in October. Frozen supplies of 32.2 million pounds rose over 50% from both last month and the same time last year.
Belly stocks had been low for much of this year, a result of strong demand for bacon, and prompted volatility in the hog market as traders adjusted prices accordingly. But softer demand in the fall allowed packers to restock their freezers.
Cattle futures were also higher. The USDA said the total beef stocks of 506.9 million pounds in October were 2% above last month but down 5% from last year, higher than expected.
Strong cash prices nevertheless helped carry the cattle market higher into the Thanksgiving break. Meatpackers paid an average of $119 per 100 pounds live for cattle on Tuesday, according to the USDA, with prices rising to $120.50 in Colorado. That was largely steady with a week earlier, though analysts were expecting a drop in price.
CME December live cattle futures rose 0.9% to $1.1905 a pound.
Analysts cautioned that the cattle market was still burdened by large numbers of fattened cattle, which could continue to weigh down cash prices and futures.
"Excess supply of market-ready cattle could keep sellers active," said the Hightower Report in a note to clients.
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(END) Dow Jones Newswires
November 22, 2017 15:20 ET (20:20 GMT)