U.S. livestock review: Hog futures mixed, Pork prices strong

Lean hog futures were mixed Monday as investors weighed strength in cash markets against the broad-market sell-off.

October hog futures rose 0.3 cent, or 0.3%, to 87.65 cents a pound in trading at the Chicago Mercantile Exchange. CME December hog futures fell 0.9 cents, or 1.1%, to 81.82 cents a pound.

October contracts found support in the continued rise in cash prices for hogs, which have been rallying over the last two weeks as demand from pork processors has surged on healthy profit margins and high prices for pork.

Traders almost uniformly assumed that China is currently buying more pork to temper inflated food prices there. China likewise moved to import more pork in summer, pushing U.S. pork prices to record levels.

Participants are nonetheless bracing for a fall in cash prices in October, which would weigh on futures since cash prices converge with futures when a contract expires. Cash prices typically show stability in September before falling again in October and November as a seasonal rise in production among pig farmers nears its peak. Hog producers typically turn up production in late summer and early fall as cooler weather makes for more efficient hog-raising conditions.

Cash prices in direct markets were mostly higher Monday as meat packers continued to buy supplies for this week's slaughter. Packers are still buying supplies in part because they're slaughtering far more animals than the same time last year. Last week's slaughter of about 2.3 million head was nearly 5% higher than the same week last year.

The USDA's pork carcass composite value Friday rose 15 cents to $95.37 a hundred pounds.

The latest Dow Jones Newswires pork packer margin index was plus $8.60 per head, compared with plus $9.44 the previous day.