U.S. livestock futures fell Wednesday in the face of widespread gains in commodities as traders worried that poor weather conditions across much of the U.S. continues to curb demand.
Live hogs for June settled down 2.22 cents, or 2.4%, at 91.65 cents per pound on the Chicago Mercantile Exchange. The July contract fell 1.47 cents, or 1.6%, to 91.55 cents per pound, while August futures dropped 0.85 cent, or 0.9%, to 93.05 cents per pound.
While cold, damp weather is supportive of grains markets, particularly corn, as farmers' planting schedules are delayed, the same conditions are negative for livestock markets, said Mike Zuzolo, president of Global Commodity Analytics and Consulting.
"The psychology of the meat trade for the past three weeks has been that, without the start of summer, we can't have the start of summer grilling season," he said.
Still, analysts said the losses in hogs were puzzling, given strength in other commodities. Corn futures jumped 4% on the day due to supply worries, while crude oil climbed 3.3% to settle above $100 a barrel. Typically, that would lift hogs as well, particularly since high grain prices hurt producers' margins and can prompt cutbacks in production.
Another factor possibly pressuring prices is expectations ahead of the U.S. Department of Agriculture's cold storage report, Allendale research director Rich Nelson said.
The average estimate of three analysts surveyed by Dow Jones Newswires pegs frozen pork supplies as of April 30 at 586.2 million pounds, up 1.6% from a month ago. Analysts' estimates ranged from 580 million to 594.4 million pounds.
If the average estimate is correct, cold storage supplies will stand 21% above year-ago levels and about 4% above the five-year average. Analysts expect the U.S. Department of Agriculture report will show gains in pork-belly and ham stocks. The government releases the report Friday afternoon.
Fueling the rise in frozen supplies is a slowdown in consumer demand as retail prices rise. The delayed start to the outdoor grilling season, which likely slowed domestic sales forcing more pork into the nation's freezers, is another factor.
The fact that hogs fell Wednesday despite the corn rally is "a very, very big deal" that could keep pressure on prices, Nelson said.
Cash bids for hogs are reported mostly steady. Some processors were buying to complete this week's slaughter schedules and others were adding to their inventories for next week amid seasonal declines in supplies and a pullback in average weights. The lighter weights indicate that producers are more current, or up to date, on their marketings.
The terminal markets are trading mostly steady with top prices from $63 to $64 per hundred pounds on a live basis.
The latest Dow Jones Newswires pork packer margin index was plus $4.62 per head, compared with plus $5.62 the previous day.
The USDA's pork carcass composite value, a measure of wholesale prices, for Tuesday was $97.02 per hundred pounds, down $1.29 from an all-time high Monday of $98.31 per hundred pounds.