U.S. livestock futures ended lower on Wednesday, as traders took profits in both lean hogs and live cattle following recent gains.
CME lean hogs for August closed down 0.65 cent, or 0.67%, to 97.325 cents per pound. The October contract slipped 0.33% to 89.7 cents.
Profit-taking was a factor in the lean hogs market, as traders positioned themselves ahead of the U.S. Department of Agriculture's cold storage report to be released after the market's close Wednesday. Prices soared the first couple days of the week and are up sharply since late May.
Analysts said futures were under pressure from traders selling to exit positions and book profits after a four-day rally in hogs that mirrored a sharp run-up in futures for live cattle.
Cash prices remain strong, however. "Packer margins remain poor, but tight supplies of market ready hogs have forced plants to raise bids to fill slaughter needs," Doane Advisory Services noted.
Investors will be closely watching the cold-storage report. The amount of meat in cold storage provides a signal on demand with inventories swelling when buying slows. Analysts will key in on the May numbers to see if demand increased after April when consumers likely opted for chicken over pork to cut their grocery bills.
The USDA is expected to report frozen pork supplies as of May 31 at 511.1 million pounds, down 34.7 million pounds, or 6.4%, from a month ago, according to the average prediction of three analysts in a Dow Jones Newswires survey. If the average estimate is correct, the amount of pork in cold storage at May 31 was still 14.6% above a year ago, but about 1% below the five-year average.
Pork processors are currently seen losing money on the hogs they slaughter as they scurry to fill orders for the 4th of July weekend. Some brokers expect cash prices to start falling next week as packers begin a seasonal slow-down in production.
The cash hog markets were mostly higher through midday on buying interest from some processors needing additional supplies to complete this week's slaughter schedules or to add to inventories for next week. Others were quoting flat to lower prices after processing margins were further squeezed this week, which could result in reduced slaughter rates at some plants.
The latest Dow Jones Newswires pork packer margin index was minus $12.76 per head, compared with minus $2.60 the previous day.
The USDA's pork carcass composite value, a measure of wholesale prices, on Tuesday was off 2 cents to $96.63 a hundred pounds.
The terminal markets traded $1 to as much as $3 a hundred pounds higher with top prices from $64 to $70 a hundred pounds on a live basis.