U.S. Hog Futures Stumble on Supply Concerns; Cattle Gain

By Jacob BungeFeaturesDow Jones Newswires

Hog futures sank as traders questioned whether the market can maintain momentum with pigs headed to slaughter in record numbers. Cattle contracts gained.

December-dated lean hog futures closed 1% lower at 64.45 cents a pound at the Chicago Mercantile Exchange on Friday, erasing gains in the prior session when the contract settled at its highest level since Aug. 18.

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Though hog futures on Friday staged a late rebound from the session's low point, the decline again raised questions as to whether prices can sustain October's upswing even as the number of hogs slaughtered at U.S. processing plants set weekly records beginning in September.

New plants have opened in Iowa and Michigan, capable of killing an estimated 22,000 hogs a day. Meat processors' demand for hogs has helped push up futures prices, with lean hog contracts rising nearly 17% so far in October.

Wholesale pork prices have been strong, with the U.S. Department of Agriculture estimating a 2.8% increase in hog carcass prices since Monday. But declines in meatpackers' cash bids for hogs in Midwestern terminal markets over recent days revived concerns the futures market rally could lose steam.

"We've seen this hog price run up quite a bit and it's starting to show in [meat]packers' margins," said Steve Meyer, an economist for research firm Express Markets Inc.

The pork industry faces a conundrum: Hog farmers have expanded their herds in anticipation of the new processing plants' needs. If meatpackers slow their hog buying in response to growing pork supplies, farmers' hogs likely will continue to pile on weight, yielding more pork when they eventually head to the slaughterhouses. That would further add to supplies.

Foreign exchange shifts are another factor that could trouble demand for U.S. pork, analysts said. The U.S. dollar's gains this week against other currencies, including the Canadian dollar and the peso, could make U.S.-raised pork less competitive on international markets.

Live cattle futures climbed Friday, though some contracts' gains were muted as traders awaited signals from the Midwestern cash markets where ranchers sell animals to beef processors.

Little trade had taken place as of early Friday afternoon as buyers and sellers continued to haggle over prices. December-dated live cattle futures settled 0.1% higher at $1.2082 a pound at the CME.

Write to Jacob Bunge at jacob.bunge@wsj.com

(END) Dow Jones Newswires

October 27, 2017 15:23 ET (19:23 GMT)