Hog futures leapt Wednesday as traders tried to close a sharp discount to cash and pork prices.
Most-active October lean hog futures at the Chicago Mercantile Exchange rose 2.8% to 66.225 cents a pound, while the front-month August contract climbed 2.7% to 81.95 cents a pound.
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Futures were under pressure through much of July, but strong demand for pork bellies, used to make bacon, helped buttress prices in the broader market. A pound of wholesale pork rose 1.65 cents to 99.63 cents a pound as of midday Wednesday, while the CME's lean hog index was at 88.1 cents a pound on Tuesday.
That leaves considerable ground to cover if the index is to align with front-month futures before they expire in mid-August.
"Futures got a little too far ahead of themselves," said Jim Burns, a broker with Rosenthal Collins Group at the Chicago Board of Trade. "People want to take advantage of that either by lifting their shorts or getting long."
Analysts say the direction of pork belly prices in the fall is key to whether cash prices and futures give out or not. Pork bellies have recently traded at record highs on the back of a voracious appetite for bacon, helping support the futures market even as hog herds swell. In its most recent inventory report, the U.S. Department of Agriculture put the national hog herd at a seasonal record.
Cattle futures, meanwhile, bounced late in Wednesday's trading session. After lackluster demand for slaughter-ready cattle at the weekly Fed Cattle Exchange auction in the morning, packers followed up by buying cattle at $1.16 a pound live in Kansas, according to the USDA. Some analysts reported higher bids elsewhere.
CME August live cattle futures rose 1.5% to $1.14525 a pound, while feeder cattle futures were also higher.
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(END) Dow Jones Newswires
August 02, 2017 15:19 ET (19:19 GMT)