Hog futures fell sharply after a steep drop in pork-belly prices.
A pound of pork bellies, used to make bacon, fell 15.54 cents, to $1.8059 a pound, as of midday Wednesday. A run-up in belly prices to highs in recent months buttressed the hog market, helping limit losses despite growing supplies of pork. Slaughter numbers and pork production rose to multimonth highs last week.
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Wednesday's turnaround weighed down lean hog futures at the Chicago Mercantile Exchange, however, which opened higher before falling. The October contract fell 2.5%, to 68.775 cents a pound, the lowest close in over three months.
"It's all about bellies. We've been waiting for this market to break on bellies, and we've finally got it," said Craig VanDyke, an analyst at advisory firm Top Third Ag Marketing in Chicago. "It looks absolutely ugly."
Cattle futures also fell, under pressure from weaker cash prices. Feedlots didn't sell any cattle at the online Fed Cattle Exchange auction on Wednesday morning, turning down bids from meatpackers. Sales so far this week have mostly been at $1.10 a pound live, down from around $1.15 a pound last week.
Analysts say many feedlots will be reluctant to sell at those levels. They will need to sell cattle at $108.50 per 100 pounds for August and $112.50 per 100 pounds for September in order to break even, according to CattleHedging.com owner Larry Hicks.
Bids approaching those levels could prompt a standoff between meatpackers and feedlots.
"Producers are fighting it," Mr. Hicks said. "As we move towards or below break evens, they're going to become resistant."
Most-active CME October live cattle futures fell 0.7%, to $1.08325 a pound, while September feeder cattle contracts closed 2.5% lower, at $1.43125 a pound.
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(END) Dow Jones Newswires
August 16, 2017 15:01 ET (19:01 GMT)