Hog futures brushed off supply pressures to close higher, locking in gains for the week.
Analysts say the spread between front- and later-month futures, cash-market hog prices and the cost of wholesale pork has become unusually wide. Though cash and pork prices have trended lower for the most part, they remain at a premium to futures.
Continue Reading Below
That has sparked buying interest as traders bet that futures will have to rise in order to close some of those gaps, analysts say, even if the specter of growing hog supplies is hanging over the market.
Lean hog futures for August at the Chicago Mercantile Exchange rose 1.5% to 83.225 cents a pound on Friday, with the most-active October contract up 2% to 66.775 cents a pound.
"We've seen basically a straight down decline over the last four to five weeks in this hog market," said Craig VanDyke, an analyst at Top Third Ag Marketing in Chicago. "The spreads are getting extremely wide on the futures."
Cattle futures, meanwhile, were mixed on Friday despite rising over the course of the week. Prices in the cash trade were largely steady from last week, with sales rising to $1.18 a pound live.
"The trade thought we were going to be down maybe $1 to $2 [per 100 pounds] this week, so that was a positive surprise," said Don Roose, president of Iowa-based brokerage U.S. Commodities.
CME August live cattle futures rose 0.2% to $1.1545 a pound, while later-month contracts fell.
Both cattle and hog supplies are expected to increase later this year, which has weighed down prices recently. But analysts say there are some potential boosts to demand on the horizon.
School lunch buying going into the fall is set to give livestock trading "a shot in the arm," Mr. Roose said. Government purchasing of pork, beef and chicken for students' lunches going into the new school year will increase consumption and bolster the overall meats sector.
Write to Benjamin Parkin at firstname.lastname@example.org
(END) Dow Jones Newswires
August 04, 2017 15:08 ET (19:08 GMT)