Hog futures fell Thursday ahead of a government report that showed frozen pork belly stocks last month dropped to a record low.
In a report released after the markets closed, the U.S. Department of Agriculture said that stocks of pork bellies in commercial freezers fell almost 60% in May from a year earlier to 31.6 million pounds and were down 6% from April. That was the lowest on record for the month of May.
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Tight stocks of bellies, which are used to make bacon, has lit a fire under prices recently amid strong demand. A pound of pork belly meat climbed 5.11 cents to $1.86 on Wednesday, according to the USDA, though prices eased as of midday Thursday.
Analysts said a further reduction in pork belly stocks could support wholesale pork and futures in the short term, despite an underwhelming reduction in overall pork stocks. Total pork supplies in cold storage fell to 592.1 million pounds in May, a slight reduction from April and down 4% from the same time last year.
"The story in the hog market has been the strength in bellies," said Craig Turner, a senior broker at Daniels Trading in Chicago, adding that the disappointing reduction in broader pork stocks were negative longer-term.
Lean hog futures for July delivery dropped ahead of the report, sliding 1.2% to 85.025 cents a pound at the Chicago Mercantile Exchange as traders locked in profits on a recent rally that saw prices soar to a 12-month high on Wednesday.
Frozen beef stocks fell to 412.9 million pounds in May, according to the USDA, down 10% from the previous month and 11% from year-ago levels. Analysts were expecting a larger reduction, though some said the impact would be muted.
"Cold storage is a staging point," Mr. VanDyke said. "I don't see it overly bullish, I don't see it overly bearish."
CME June live cattle futures fell 0.7% to $1.18625 a pound, continuing to trade at multiweek lows as larger supplies allow packers to lower bids in the cash market for cattle. That has futures traders betting prices will trend lower in the months to come.
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(END) Dow Jones Newswires
June 22, 2017 16:53 ET (20:53 GMT)