U.S. lean hog futures continued to post losses Wednesday as steadily rising supplies weighed heavily on wholesale prices.
October hog futures fell 0.1 cent, or 0.1%, to 85.60 cents a pound in trading at the Chicago Mercantile Exchange. December hogs fell 0.2 cent, or 0.2%, to 82.95 cents a pound.
Futures felt broad pressure after wholesale prices dropped sharply Tuesday, adding to their run of falling values. The U.S. Department of Agriculture's pork carcass composite value fell $2.60 to $98.03 a hundred pounds, the lowest since July 13.
Prices for animals and pork have been falling from record highs in recent weeks as supplies rise steadily into the fall. Hog producers typically boost production in autumn as cooler weather creates more efficient conditions for raising hogs.
USDA's national weighted average hog price has fallen nearly 15 cents a pound, or 14.3%, from the record high of $104.08 per hundredweight hit on Aug. 4.
Supplies are expected to keep rising into November. Weekly slaughter rates are likely to grow as much as 17% between August and November and could reach as high as 2.4 million, said Bob Vande Vorde, of Mast Group, an affiliate of Intl FCStone.
Cash prices also fell as meat packers had finished filling retailers' orders for the Labor Day holiday weekend.
The sharp decline in cash values are, especially at the moment, a key factor for hog futures traders. That's because the October contract, which currently trades at a steep discount to cash prices, won't expire for more than six weeks, when its price will ultimately converge with the cash values. Despite the deep discount, October futures still trade more than 5 cents above their highest-ever expiration price.
Bids in the cash hog markets are predicted from 50 cents to $2 per hundredweight lower as processors have ample supplies and can pressure the market. Seasonal expansion in the number of slaughter-ready hogs available to the plants and fewer animals needed for the Labor Day holiday-shortened workweek ahead are further weighing on cash prices.
The USDA also reported an average weight for barrows and gilts in Iowa/southern Minnesota last week at 263.5 pounds, up 1.0 pound from the previous week but still 2.1 pounds below a year ago. The latest figure was up 2.7 pounds from the seasonal and year's low of 260.8 pounds hit the week-ended Aug. 5.
Tuesday's slaughter was reduced by around 8,000 head due to a mechanical problem at a plant in the eastern corn belt. The plant was unable to slaughter on the first shift, analysts and dealers said.
Early projections for Saturday's slaughter are mostly around 50,000 head, and the week's total is expected to be in the area of 2.145 million. The estimates are subject to change as the week progresses.
The latest Dow Jones Newswires pork packer margin index was plus $15.30 per head, compared with plus $16.70 the previous day.
The terminal markets are expected to trade mostly lower with tops so far from $58.50 to $64 a hundred pounds.
The latest CME two-day lean hog index, calculated using USDA market data, for Monday was down 1.39 cents to 98.36 cents a pound.