Hog Futures Rise on Signs of Declining Pork Supply; Cattle Drop

Hog futures rose the most in a week on signs that the supply of animals to U.S. meatpackers is shrinking as demand for pork climbs. Cattle fell.

Wholesale pork advanced to 79.82 cents a pound yesterday, the highest price since August 2008, government data show. As of last week, packers processed 30.3 million hogs this year, down 4.5 percent from a year earlier. Farmers slashed herds after high feed costs and the recession spurred two years of losses.

“The story of tightening hog supplies is still there,” said Lawrence Kane, a market adviser at Stewart-Peterson Group in Elmwood, Illinois. “It’s getting to be bratwurst season. That grinding meat is in short supply. And that’s part of what’s driving” wholesale prices, he said. “Grilling season is always good for the meat markets.”

Hog futures for June settlement rose 1.5 cents, or 1.8 percent, to 85.475 cents a pound on the Chicago Mercantile Exchange, the biggest gain since April 5. The most-active contract has climbed 15 percent in the past year as farmers cut breeding herds to 5.76 million sows, the fewest on record.

Futures also rose on speculation that a weak dollar and outbreaks of foot-and-mouth disease in China may spur U.S. pork exports, Kane said.

“There is a little chatter that the Chinese hog herd is not as healthy as they might like it,” Kane said. “Meat is a world product, so a little shortage in one part of the world does help the other parts.”
Cattle Markets

Cattle futures for June delivery fell 0.575 cent, or 0.6 percent, to 93.475 cents a pound in Chicago. The price is up 10 percent in the past year. Feeder-cattle futures for May settlement slid 1.45 cents, or 1.3 percent, to $1.136 a pound.

Retailers may slow beef purchases after a surge in costs, Kane said. Wholesale choice beef climbed 0.7 percent at midday to $1.6746 a pound, the highest price since July 21, 2008, according to U.S. Department of Agriculture data.

“The retailer is playing it a bit hand-to-mouth and doesn’t want to load up on overpriced meat,” Kane said.

Meatpackers shipped 17.8 million pounds of choice beef last week, down 32 percent from a year earlier, USDA figures show.

Whitney McFerron
Source: Bloomberg