U.S. lean hog futures traded sideways Thursday as investors weighed stalled debt talks in Washington against a record price for pork.
August lean hogs were flat at to $1.0192 a pound in trading at the Chicago Mercantile Exchange. October lean hogs were up 0.2 cent, or 0.2%, to 91.62 cents a pound.
Seized-up debt talks in Washington are increasingly spooking investors, analysts said. A failure among lawmakers to resolve debt-ceiling talks could potentially send shockwaves through economy, tied in large part to a ratings downgrade for U.S. debt. Livestock are considered economically sensitive since consumers typically buy less meat when their incomes fall.
"My customers don't want to do anything" given that Washington hasn't yet decided whether to raise the nation's debt ceiling, said Jim McCormick, broker at Allendale Inc. "The questions I get constantly are 'If they do pass it, what's going to happen?' and 'If they don't pass it, what's going to happen?'"
Futures largely shrugged off recent prices for fresh pork, which hit a record high on Wednesday. Strong demand for U.S. pork exports have made for resilient prices for fresh product, even as a summer heat wave in the U.S. has tempered consumer demand for grilling meat.
The U.S. Department of Agriculture's carcass composite value, a measure of wholesale prices, on Wednesday rose $1.03 to $102.34 a hundred pounds, a new all-time high.
Brokers said investors are interested to see when those higher prices for pork trickle down and boost prices for the hogs themselves. Hogs futures continue to hold a premium on widespread beliefs that China is looking to import more pork to control food prices there.
Early predictions for cash hog prices Thursday ranged from steady to up $1 a hundred pounds on better-than-expected buying interest late in the week. A few processing plants need additional hogs to complete this week's slaughter schedules, said livestock dealers and market managers. Furthermore, most processors are seeking more hogs to add to their inventories for early next week.
Demand for the animals remains strong, and supplies of slaughter-ready hogs have tightened this week due in large part to the recent heat wave, dealers and analysts said. The heat and high humidity caused hogs to gain less weight than normal, and some producers have offered fewer animals for sale.
Analysts predict Thursday's hog slaughter to be around 407,000. Projections for the weekend slaughter are light and mostly 2,000 or less. On Monday, four plants are scheduled to be closed, three of them for a floater holiday. The combined daily processing capacity of the four plants is about 64,000 head.
The latest Dow Jones Newswires pork packer margin index was minus 26 cents per head, compared with plus $2.34 the previous day.
The terminal markets were expected to trade steady to higher.
The latest CME two-day lean hog index, calculated using USDA market data, for Tuesday was up 0.66 cent to 99.33 cents a pound.