U.S. hogs: Futures fall sharply on global selloff, economic worries

CHICAGO (Dow Jones)--U.S. lean hog futures fell sharply Thursday as investors fled from global markets on growing fears of a worldwide recession.

October hog futures fell 0.57 cent, or 0.6%, to 88.70 cents a pound in trading at the Chicago Mercantile Exchange. CME December hogs fell 1.12 cent, or 1.3%, to 82.97 cents a pound.

The pork complex, like other commodities, came under intense pressure as investors sold out of stocks worldwide, and also pressured 10-year Treasury yields to 1940s levels after a gloomy outlook by the Federal Reserve renewed fears of a global economic slowdown.

The Dow Jones Industrial Average was recently down 366 points to 10759. Crude was down 5.6% to $81.09 a barrel. Livestock futures are increasingly sensitive to moves by big investors, especially when they move in or out of markets en masse.

Hog futures were also pressured by sharp gains in the U.S. dollar, which has often risen in value as investors grow more worried about euro-zone economies. A rise in the value in the greenback typically pressures dollar-denominated commodities since foreign buyers--who are key purchasers of U.S. red meat --have less relative spending power.

The complex fell despite fundamental indicators that remain mostly supportive of current prices. Wholesale pork values have held fast to elevated levels as exports have soared. Pork processors have bid up the prices of hogs for the last two weeks, pointing to strong demand from retailers and foreign buyers. Pork prices have remained strong even as processors' slaughter rates have been running well above last year's levels--this week, by 4%.

CASH MARKETS

Early predictions for cash hog prices were mainly steady as supplies of slaughter-ready animals and the current demand from processing plants was generally well balanced.

Packers have been able to sell the additional pork being produced at profitable prices, so the plants continue to operate at high levels. Projections for the weekend slaughter are mostly around 165,000 head, give or take a few thousand, and the week's total is on target to reach about 2.285 million head.

The latest Dow Jones Newswires pork packer margin index was plus $6.96 per head, compared with plus $6.38 the previous day.

The USDA's pork carcass composite value on Wednesday rose 21 cents to $96.05 a hundred pounds.

The terminal markets are expected to trade mostly steady to $2 higher at one location with tops so far seen from $60 to $65 a hundred pounds.

The latest CME two-day lean hog index, calculated using USDA market data, for Tuesday was up 0.82 cent to 89.89 cents a pound.