U.S. livestock review: Hog futures up again on cash

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U.S. lean-hog futures rose again on continued strength in cash markets as demand increases seasonally.

October hog futures rose 1.37 cents, or 1.6%, to 89.02 cents a pound in trading at the Chicago Mercantile Exchange. CME December hogs rose 1.15 cents, or 1.4%, to 82.97 cents a pound.

The pork complex has been supported for the past two weeks by a strong rebound in cash prices, which are rising seasonally after falling sharply in August and early September. Pork demand and supplies of slaughter-ready animals both grow sharply in late summer as cooler weather makes for more-efficient hog-raising and as consumers grill more meat.

Traders are also expecting prices to start falling again in coming weeks since the peak of the hog-production cycle, which typically happens in November, outweighs demand from meat packers. Prices typically stabilize in mid-September, just as they have this year, and then start falling again in late September or October.

Futures prices hold evidence of this murky picture for cash prices. After October contracts traded for weeks at a steep discount to cash markets--which meant traders were speculating that cash prices would fall--October futures now closely track current cash prices. The difference between futures prices and cash prices is significant because a futures contract converges with cash as it nears expiration--for October, about four weeks away.

Forecasts for cash markets are less certain this year because, traders say, China has moved in and out of the market while trying to keep a lid on inflated food prices within its mainland. Big purchases by China can provide weeks of support for the complex, which can, in turn, disappear rather abruptly when Beijing pulls back on its buying.

Cash hog bids were reported mostly steady on buying interest from a few plants, for deliveries Friday and Saturday, to complete this week's slaughter schedules. Other plants were booking loads to arrive next week.

Pork processors continue to push large numbers of hogs through their plants. Strong export sales are helping to keep overall demand up for hogs despite a seasonal increase that is under way. Projections for Saturday's slaughter now range from 160,000 to 165,000 head.

The latest Dow Jones Newswires pork-packer margin index was plus $6.38 per head, compared with plus $8.00 the previous day.

The terminal markets traded from steady to $2 a hundredweight higher with top prices from $58 to $65 a hundred pounds on a live basis.

The USDA's pork carcass composite value, a measure of wholesale prices, on Tuesday was down five cents at $95.84 a hundred pounds.



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