LIVESTOCK-U.S. lean hog futures gain on lower-than-expected inventory

By Christopher Walljasper

CHICAGO, Oct 14 (Reuters) - U.S. lean hog futures climbed on Wednesday as traders grappled with mounting confusion on lower-than-expected slaughter rates, traders said.

Wednesday's daily U.S. hog slaughter was 489,000 head - or 2,000 fewer than the same period last year, according to data published by the U.S. Department of Agriculture.

For the week to date, packers also have slaughtered 12,000 fewer hogs, compared to the same period a year earlier.

But USDA's data in recent hog and pig reports has indicated that packers' slaughter volumes should be running far higher than last year, said Dennis Smith, a commodity broker at Archer Financial.

"We’re missing over a million pigs, is what it amounts to," Smith said, who noted that packer margins have remained relatively high as cash hog prices are lowering and cut-out prices are rising. "That's the huge debate."

CME October lean hogs added 0.650 cent to 78.425 cents per pound. Most-active December hogs settled 2.275 cent higher at 68.425 cents per pound.

Meanwhile, live cattle futures dipped, following the cash cattle markets lower as wholesale beef prices continue to soften, traders said.

CME December live cattle futures dipped 0.950 cent to 110.275 cents per pound, while CME January feeder cattle fell 0.500 cent to 136.325 cents per pound.

Smith said feeder cattle producers are monitoring how rising grain markets could impact feed costs.

"They’re also concerned about rising placements, with the drought," he said. "They can’t even get wheat to germinate, let alone get it to grow and run cattle on it."

The USDA's daily cattle slaughter report showed 119,000 head slaughtered, in line with a week ago and 2,000 more than a year ago. Packer margins trimmed to $202.45 per head, compared to $271.35 a week ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC. (Reporting by Christopher Walljasper in Chicago; editing by Grant McCool)

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