U.S. lean hog futures fell Wednesday as investors broadly sold off commodities on concerns over the condition of the American economy.
August hog futures were recently down 0.85 cent, or 0.8%, to $1.0295 a pound in morning trading at the Chicago Mercantile Exchange. CME October hogs were recently down 2.22 cents, or 2.4%, to 90.45 cents a pound.
Hog futures were towed under by a broad sell-off in commodities as investors sold out of riskier assets on broad concerns that the U.S. economy is stagnating. Some economists have warned that Tuesday's legislation to cut U.S. government spending could hurt the economy in the short term. Meanwhile, orders for U.S. factory goods fell in June for the second time in three months, the Commerce Department said.
The Dow Jones Industrial Average was recently down 87 points to 11779. Crude oil fell 1.3% to $92.49 a barrel.
The broad sell-off served to cool off an ongoing rally across the hogs complex. Pork prices posted a record Tuesday for the sixth straight day. Hog futures, too, posted a record high Tuesday, as measured by historical prices for the front month contract.
The U.S. Department of Agriculture's carcass composite value, a measure of wholesale prices, on Tuesday climbed 86 cents to $106.23 a hundred pounds. The August hog contract on Tuesday closed at a record $1.038 a pound.
Futures also fell despite signs that supplies are tightening due to the recent summer heat wave in the Midwest.
The USDA's average weight for slaughter-ready hogs in Iowa and Southern Minnesota last week fell to 260.9 pounds, the lowest in nearly 3 years. The recent heat wave, which included high humidity, reduced hogs' feed consumption and trimmed their daily weight gains. Lighter weights mean packers turn out less pork per animal, and fewer hogs may be available for slaughter near-term, which is supportive for prices.
Cash hog prices in the Midwest Wednesday are expected to be mostly steady. While many of the pork processing plants may be nearly full for this week, some still need additional animals to complete their slaughter schedules for Thursday or Friday.
Limited supplies of slaughter-ready animals and strong world demand for pork, especially from China, are providing solid underlying support for cash hog prices in the near-term, said livestock dealers and analysts.
Peaks in wholesale pork prices were hit from mid to late August in two of the past three years. Based on the recent history, Rich Nelson, director of research with Allendale Inc., predicts that pork prices will again reach a high within the next two weeks or so.
Meanwhile, average hog weights in Iowa/southern Minnesota last week fell to 260.9 pounds, lowest since early September 2008.
Analysts predict Wednesday's slaughter to be around 404,000.
The latest Dow Jones Newswires pork packer margin index was plus $1.50 per head, compared with plus $1.86 the previous day.
The terminal markets were expected to trade mostly steady with tops seen from $68 to $74 a hundred pounds.
The latest CME two-day lean hog index, calculated using USDA market data, for Monday was up 1.08 cents to $1.0334 a pound.