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Hog futures soar, cattle slide

04/30/2013 @ 4:19pm

U.S. lean-hog futures extended their April rally Tuesday, carving out a fresh eight-and-a-half-month high for the spot contract.

Thinly traded May hog futures rose 0.8 cent, or 0.9%, to 90.1 cents a pound at the Chicago Mercantile Exchange, the highest front-month closing price since Aug. 14. Most active June hog futures advanced 0.42 cent, or 0.5%, to 92.57 cents a pound, the highest close for that contract since Feb. 15. Other contracts also advanced.

Hog futures have been underpinned by strengthening retail demand for grilling meats like burgers and brats, which typically attract more consumers during the spring and early summer. A seasonal decline in supplies is also under way, due to normal hog birthing patterns and the sow liquidation that occurred at the peak of last year's drought.

"If things are good now [for pork demand], the psychology is that they'll be better in a few months," said John Kleist, a senior analyst with brokerage Ebottrading.com in Lakemoor, Ill., who noted the squeeze of pork supplies could continue to buoy wholesale pork prices.

Hog futures were also lifted Tuesday by expectations for improving demand for U.S. pork from export markets. Some analysts think China may boost imports of U.S. pork amid concerns among Chinese consumers about meat products raised domestically following a bird-flu outbreak in recent weeks.

Other market watchers are more cautious, saying they would like to review March export data coming later this week to determine whether export demand is picking up.

In cash markets, hog bids ranged from 50 cents to as much as $2 per hundredweight higher for loads to arrive to the plants the remainder of this week.

Buying interest from packers has improved this week due in part to a seasonal reduction in supplies along with expectations for better demand for the retail pork cuts into late spring and early summer.

The USDA reported wholesale pork prices at midday down 80 cents per hundredweight at $86.84, based on Omaha, Neb., quotes. The setback in pork prices may cause some packers to reevaluate their slaughter schedules for the balance of the week.

The Dow Jones Newswires pork packer margin index for Monday was $1.91 per head compared with $4.51 the previous day.

The projected CME two-day lean hog index, calculated using USDA market data, for Monday was up 1.04 cents at 83.46 cents a pound.

CATTLE COMPLEX

U.S. cattle futures reversed earlier gains midday to settle modestly lower, as technical traders remained cautious about demand for cattle in the summer months.

April live-cattle futures, which expired at 1 p.m. EDT, rose 0.7 cent, or 0.55%, to $1.284 a pound at the CME. Most active June futures declined 0.65 cent, or 0.5%, to $1.219 a pound. Other contracts were all lower.

Cattle futures are in the midst of a seasonal upswing driven by higher demand for beef, said David Hales, publisher of Hales Cattle Letter in Amarillo, Texas. But despite the slow start to the spring "grilling season," market watchers remain uncertain how much further demand will carry beef and cattle prices.

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